The direction of the A/D Line matters more than its level, because the level depends only on the date the running total started. When the index and its A/D Line make new highs together, the rally has broad participation and is more likely to continue. When the index makes a new high but the A/D Line does not, fewer stocks are carrying the advance. This bearish divergence often comes before a correction. The opposite, a bullish divergence, appears when the index makes a new low but the A/D Line holds above its previous low, a sign that selling pressure is fading.
The charts above show the Advance/Decline Line under the price of 24 stock indexes, from the S&P 500, Nasdaq 100 and Russell 2000 to the FTSE 100, DAX and Nifty 50, so you can compare breadth across markets at a glance. Click a chart to open a larger version.
Related stock screens: New 52-Week High Stocks, New 52-Week Low Stocks and Price Crossed Above MA(200) Stocks. You can also use market breadth as a filter in your own screens and strategies in the Formula Screener and the Strategy Backtester.
The Advance/Decline Line is a running total of the number of advancing stocks minus the number of declining stocks in an index. It shows whether most stocks take part in a market move or only a few large ones.
Each day, the number of declining stocks is subtracted from the number of advancing stocks, and the result is added to the previous value of the line. Unchanged stocks are ignored.
A bearish divergence occurs when the index makes a new high but the A/D Line does not, so fewer stocks support the rally. A bullish divergence occurs when the index makes a new low but the A/D Line stays above its previous low.
The value of the A/D Line depends on the number of stocks in the index and on the date the running total started. Compare the direction of the lines and their divergences, not their values.
Yes. In the Formula Screener, advdec is the A/D Line. For example, (advdec > advdec@1)@sp500 and rsi(14) ca 30 finds stocks whose RSI crossed above 30 while the S&P 500 A/D Line is rising. The same condition works as a market filter in the Strategy Backtester.
