01 November 2010

Breadth Indicator

I have tried to group all the stocks in F&O segment of NSE into deciles above and below their average price. Had to exclude few stocks that were split. The chart below is on the data for November series.

As per the definition the bar at 0% means the stock's latest closing is very close to its average closing price for the whole of November series. The bar at 100% means that the stock's closing is very close to the highest closing (it could be the highest closing). Also the bar at -90% means that the stock's closing is only 10% away from the lowest close, and similarly 90% means that the stock's closing is only 10% away from the highest close.

So what we get from the chart is not only how many stocks are closing at lows or highs, we can also see how many stocks are closing at what percentage distance away from high, low and average! So I would expect during a flat market a very "Normal" distribution, and at extreme market conditions a very skewed distribution.

So out of 192 samples here, we see 37 stocks are having a reading of 50% or higher and 64 stocks having a reading of -50% or lower. Certainly not a show of strength, as the reading we get for Nifty is 40%! And if we do a weighted average of the entire list we get a reading of -20%!

This shows that the 50 stocks in the Nifty are performing much better than the rest 142 in the F&O segment taken into consideration here. Talk about positive sentiment !!


Faisal Humayun said...

this is a real nice observation and goes to show that the overall sentiment is not that great t a time when index stock have somehow been kept at higher levels...for sure, more correction is on the cards and it should come sooner rather than later...RBI meet, Fed meet would serve as key triggers...the short week promises to be an exciting one...

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