An overbought/ oversold indicator that shows the percentage of stocks that are advancing on an exchange. It is computed by calculating the number of advancing issues on an exchange such relative to the total number of issues (advancing + declining) on it. Eventually, the indicator generates a 10-day moving average of this percentage. The percentage of advancing issues to total issues is averaged with a 10 day exponential moving average to calculate the true Zweig breadth thrust (ZBT):
ZBT = 10 day ExpAverage (advancing issues/ total issues) * 100
Where: total issues = advancing issues + declining issues
This indicator can signify the start of a likely new bull market when it moves from a level of below 40% (indicating an oversold market) to a level exceeding 61.5% within any 10-day period. A reading of less than 40% of stocks advancing signifies an oversold market, while a reading over 61.5% is an indication to an overbought market.
This technical analysis tool, which is a measure of the market momentum, is also known as breadth thrust indicator.
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