Market breadth
How many stocks are participating in a market move, not just the index.
Price, volume and breadth
What is Market breadth?
The Nifty 50 can rise because a handful of heavyweights rally while most stocks fall. Breadth measures participation: how many stocks are advancing, how many are above their moving averages, how many are making new highs. Healthy rallies are broad; narrow rallies led by a few names are fragile. Breadth often turns before the index does.
Formula
Advance/decline ratio = advancing stocks ÷ declining stocks
% above 200 DMA = stocks closing above their 200-day SMA ÷ stocks with 200 days of history
New highs − new lows = stocks at 52-week highs minus stocks at 52-week lows
How to read it
- An A/D ratio above 1.5 is broad buying; below 0.67 broad selling.
- More than 70% of stocks above their 200 DMA is a strong (and eventually stretched) market; under 30% is washed out.
- Index at a new high while % above 200 DMA falls = negative divergence, a narrowing rally.
Common mistakes
- Using only the index to judge 'the market'. Your portfolio is more likely to behave like breadth than like the Nifty.
