A successful self trader – Rule # 3
Market breadth has a plethora of interpretations. It can refer to the number of stocks, or sectors or themes. But the moral of the story is simple. Never bet on a market direction that is not supported by breadth. Market breadth gives the legs for the market to stand on. In fact, the final and decisive confirmation of a market trend is always the breadth. Broader the trend, more affirmative the direction!
Understanding market breadth
There may be a variety of ways to understand market breadth, but the best way is through a live market example. On the day of the Union Budget 2015, the market was sharply pulled down by ITC. Higher than expected, excise on cigarettes, led to aggressive selling in the stock. The index which was sharply down in the afternoon had rallied by evening. But, why did this happen? Continue reading