In this blog we have decided to explain our
readers some basic technical analysis terms used daily in the market.
1)52-WEEK RANGE
The lowest and the highest prices at which a stock / share /
scrip has been traded in the last 52 weeks. The 52-week range is provided in a
stock's quote summary along with data such as today's change and year-to-date
change. Stocks that have been trading for less than a year will still show a
52-week range even though data for the full range is not available. Technical analysts associate a stock's current traded price to its 52-week range
to get a comprehensive sense of how the stock is performing, as well as how
much the stock's value has varied. This information may indicate the probable
future range of the stock and how volatile the stocks are. The stock quote
explains the 52-week range for S&P 500 index.
2) ADVANCE/DECLINE INDEX
Advance/decline
index is a technical trend analysis tool that represents the total difference
between the number of advancing and declining stock prices. This index is
considered one of the best indicators of market movements as a whole.It is a
powerful stock trading signal which indicates the trends of the market. It explains the
difference between the number of stocks advancing and declining in a stock
index in terms of trading prices.
The Advance/Decline Index is calculated by accumulating the
difference between the number of advancing issues and the number of declining
issues over time.
In general, increasing values of the advance/decline can be
used to confirm the chances that an upward/bullish trend will continue. If the market is up but there are more declining issues than advancing ones, it's usually a
sign that the market is losing its breadth and may be getting ready to change
direction.
Application of Advance/Decline Index
When more stocks are advancing than
declining, the Advance Decline Index moves up indicating stock market strength.
Conversely, when more stocks are declining than advancing, the Advance Decline
Index trends down, indicating stock market weakness.
Another
way to use the Advance Decline Index is to look for a divergence between the stock market index and
the Advance Decline Index. Often, an end to a bull market occurs when the
Advance Decline Index trends sideways or down while the stock market index is
still making new highs as shown in the Yahoo Advance Decline table below.
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