Technical Analysis, Studies, Indicators:
Advance Decline
Issues
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Studies
The term declines represents a cumulative (i.e., running)
total of the number of stocks (issues) that have fallen in price compared to
their close on the previous trading day. In other words, if the price of a
particular stock is currently trading below its closing price from the previous
trading day, this stock is considered part of the days declines group.
Conversely, the term advances refers to a cumulative (i.e.,
running) total of the number of stocks that have risen in price compared to
their close on the previous trading day. If the price of a particular stock
currently trades above its closing price from the previous trading day, this
stock is considered part of the days advances group.
Advances and declines are also called advancing issues
and declining issues, respectively.
Chart 1. S&P 500 5-day
intraday (one bar = 15 min)
Advancing and declining issues
In technical analysis, advances and declines data are used to
assess market breadth. Looking at the chart above, a technical analyst might
say that the market had negative breadth from July 21-26, but that the breadth
turned positive on July 27.
Two other commonly used indicators that are based on the
advances and declines concept are:
- The advance - decline line: This is simply the number of
stocks that are currently trading higher (advancing issues) minus the number
of stocks currently trading lower (declining issues);
- The advance / decline ratio: This ratio is derived from
dividing the number of stocks that are currently trading higher (advancing
issues) by the number of stocks that are presently trading lower (declining
issues).
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