Advance Decline Line

12 Jan

The advance decline line (aka AD line) is a number composed of the net sum of advancing stocks minus the number of declining stocks.

This number is calculated separately for the NYSE and the NASDAQ. This is one of four market internals indicators, the other 3 are Market Breadth, the NYSE tick, and the Trin.

Example: A day with 500 advancing stock and 2000 declining stocks would yield an a/d line of -1500.

How to Use the Advance Decline Line

An advance decline line reading of greater than 1500 or -1500 is usually indicative of a trending day. Therefore if the AD Line opened the day at +1600 and remained at this level or better, any pullback would be a valid buy or add because internally the same number of stocks are still advancing.

This scenario is flipped for shorts, with an a/d line of say, -1900 any bounce would be a valid short.

Advance Decline Line

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