02 Advance Decline ratio (ADR)

Here the number of stocks that closed higher than the prior close (advancing) are divided by the number of stocks that closed lower (declining). When the indicator rises, stocks are advancing faster than stocks that are declining: a market that is potentially overbought. The advance-decline ratio can provide a signal that the market is about to change directions.

This is not a technical indicator for a given stock but a general indicator for the market.

Figure 8.3: ADR