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The
advance/decline line is one of the most popular market breadth indicators.
It is a very simple measure of how many stocks are taking part in a rally or
sell-off and it's usually calculated from NYSE stocks. The A/D line is
calculated as follows:
A/D Line = (#
of Advancing Stocks - # of Declining Stocks) + Yesterday's A/D Line Value
The Advance/Decline Ratio Oscillator (ADRO) is a variation on
the advance/decline line where it accounts for total market volume beyond the
NYSE. The ADRO has a tendency to identify near-to-intermediate tops when the
indicator is above 4.00, and near-to-intermediate bottoms when the indicator is
at -2.00 or below. Below is an example of the ADRO through April 17, 2009,
where on March 30, 2009 the market had 12 advancing stocks for every 1 declining
stock, representing a strong rally with solid market breadth.
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