What is 'Market Breadth'

Market breadth is a technique used in technical analysis that attempts to gauge the direction of the overall market by analyzing the number of companies advancing relative to the number declining. Positive market breadth occurs when more companies are moving higher than are moving lower, and it is used to suggest that the bulls are in control of the momentum. Conversely, a disproportional number of declining securities is used to confirm bearish momentum.

BREAKING DOWN 'Market Breadth'

A large number of advancing issues is a sign of bullish market sentiment and is used to confirm a broad market uptrend. Traders will specifically look at the number of companies that have created a 52-week high relative to the number that created a 52-week low because this data can provide longer term information about whether the bullish or bearish trend will continue.

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RELATED FAQS
  1. How can I use market breadth to my advantage?

    Market breadth is a study that compares the number of companies on a given exchange that have created new 52-week highs to ... Read Answer >>
  2. Why is the Breadth Indicator useful for tracking the overall economy?

    See how analysts might use technical breadth indicators to judge the health of the economy as a whole, and learn why one ... Read Answer >>
  3. Why is it important for traders and investors to follow market indicators?

    Learn about market indicators such as the Advance/Decline Index and market breadth. Discover why these indicators are so ... Read Answer >>
  4. How do I build a trading strategy using the Cumulative Volume Index - CVI?

    Find out how traders and analysts make use of the cumulative volume index, a technical breadth indicator, within their trading ... Read Answer >>
  5. Why is the Toraku Index important for analysts of the Tokyo Stock Exchange?

    Learn how the Toraku Index is used to predict market trends on the Tokyo Stock Exchange, and understand how market breadth ... Read Answer >>
  6. What is the "percentage off the 52-week high or low"? How is this calculated?

    The "percentage off the 52-week high or low" refers to when a security's current price is relative to where it has traded ... Read Answer >>
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