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Breadth Thrust is another less known market breadth indicator. It is a market momentum indicator also called the Zweig Breadth Thrust or ZBT because it was created by Dr. Martin Zweig. As with other market breadth indicators applied in technical analysis, the Breadth Thrust uses the number of advancing and declining stocks. The indicator measures the market momentum by calculating the percentage of stocks, in the U.S. stock market, that are advancing (The advance decline data comes from three major U.S. exchanges: NYSE, NASDAQ and AMEX).
This composite item returns the number of advancing issues divided by the number of advancing plus declining issues. The Zweig Breadth Thrust is calculated by taking the 10-day exponential moving average of the latter result and then multiplying it by 100. This creates an oscillator that moves from 1 to 100.
The composite symbol name is "_Breadth_Thrust" and the exponential moving average formula that should be applied to it is:
thrust = ema(close, 10) * 100;
Plot(thrust, "Zweig Breadth Thrust", colorBlack, chartLine, styleOwnScale);
Dr. Zweig uses a 10-bars exponential moving average, but you can use your own period or timeframe. And you can also use another type of moving average.
As with popular indicators like the Relative Strength Index, RSI, there is one overbought area and one oversold area. The indicator is overbought when its value is higher than 61.5. It is oversold when its value is lower than 40.
According to Dr. Martin Zweig, a rare bullish signal is generated when the Breadth Thrust indicator values move from an oversold area to an overbought area within a 10-day period.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
