Advance - Decline line
Line measuring advances and
declines that reflects market breadth. In its simplest form ADLine is a
summation over time of the net daily difference between the number of
advancing issues and the number of declining issues. We use slightly
improved formula which takes into account also number of unchanged issues.
The exact AFL formula for
Difference = ( AdvIssues()
- DecIssues() ) / ( UncIssues() + 1 );
DiffSqrt = IIF( Difference > 0, sqrt( Difference ), - sqrt( - Difference )
ADLine = Cum( DiffSqrt );
This is a classical
indicator which tends to give a good reading of the overall strength of
the market. A break in the A/D line usually proceeds a break in prices.
Look for non-confirmation and divergence.