Market breadth charts help us understand internals behind the movement of stock market. It helps us understand market sentiment. Below is our custom breadth chart with both long & short term market breadth.The range of Market Breadth is between +100 to -100.

There are three lines on the chart

  1. Long term Breadth
  2. Short-Medium Term Breadth
  3. NIFTY
There are broadly two ways to analyse this chart.

Using Long Term Breadth

When long term Breadth is positive, it shows that the long term market sentiment is positive and there is a greater probability of prices rising going forward. When long term breadth closes above 0 on month end basis, it can be a good time to start accumulating stocks for the long term. When breadth is negative, it shows that the market sentiment is broadly negative and it may be a good time to hedge ones long term positions, book profits or stay away from market at this time.

Using Short Term Breadth

Momentum Buyers

In this interpretation, when Long term breadth is negative and when short term turns positive, it is time to buy for the short term. This indicator can only be used for short term.

Value Buyers

This interpretation is useful for investors doing “SIP” into stocks or equity mutual funds. Good time for such investors is to buy when Long Term Breadth is Negative and Short Term is at the bottom.