Advance-Decline Line

Advance-Decline Line (A-D Line)

The Cumulative Daily Advance-Decline Line, perhaps the most widely known market breadth indicator, traditionally has been used to spot divergences relative to a general market price index, such as the S&P 500 or Dow Jones Industrial Average.

Most commonly, the Cumulative A-D Line is calculated as a running total of daily net advancing minus declining stock issues on the New York Stock Exchange. Similar indicators may be calculated for other markets, such as NASDAQ, and weekly data also may be used. There are only two steps to compute this indicator.

1. From the number of advancing issues, subtract to number of declining issues each day, respecting sign. This is net advancing issues, and it is often a negative number.

2. Add that daily advance-declines difference to a cumulative total of the daily netadvancing issues. This forms a continuous line that rises and falls with breadth trends on the NYSE.

A-D Line ValuedayT = (# of Advancing StocksdayT – # of Declining StocksdayT) + A-D Line ValuedayT-1

Source: Colby, Robert. The Encyclopedia of Technical Market Indicators; (c) 2003.

 

The following chart is an example of an Advance Decline Line.

advance_decline_line

 

 

 

 

 

 

 

 

 

Source: Charts created by Bloomberg LP.  All rights reserved. Click here for more information on Bloomberg.

The following chart is an example of an Advance Decline Line with shading.

advance_decline_line_with_shading

 

 

 

 

 

 

 

 

 

Source: Charts created by Bloomberg LP.  All rights reserved. Click here for more information on Bloomberg.