52 Period High-Low Breadth

The first question which pops up in our mind is why 52 period, why not 30 period, why not 10 period, well to answer that question, we shall have any periods if we have our own reasons to use that, here the reason why 52 period is because, in a year there are 52 weeks, hence 52 period.

Ok, how this 52-period high-low breadth is created?

Let’s look at an example.

The above chart is a weekly timeframe chart of Reliance Industries, I’ve added 52 periods Donchian Channel on the price.

Whenever the price of the reliance industries reaches a new high price in the past 52 weeks, the upper band of the donchian channel marks the new high of the price by rising the upper band to the 52 week’s high price, and whenever price creates a new low for the past 52 weeks, the lower band of the donchian channel marks it by lowering the lower band to that 52 weeks low price.

In the above chart, whenever a new 52 week high is created, I’ve marked it with a green dot and whenever a new 52 week low is created I’ve marked it with a red dot.  From 2016 we can see a lot of green dots, but only two red dots.

Now, let’s get back to the 52-period high-low breadth. Imagine there are two buckets, one green bucket and one red bucket, let’s stick a label “52-weeks high” on the green bucket and stick a label “52-weeks low” on the red bucket.

Whenever the reliance industries makes a new 52-week high, put it in the green bucket (52-weeks high) and whenever the reliance industries makes a new 52-week low, put it in the red bucket (52-weeks low). In the year 2016 reliance made a new 52-week high, so we put it in the green bucket, and once again in 2016 it made another 52-week high so we left it to remain the green bucket, and in 2017 reliance made multiple new 52-week highs and we left the reliance to remain the green bucket, no matter how many 52-week highs it makes, as long as it makes a new 52-weeks high it will continue to remain the green bucket only.

In the year 2020, reliance made a 52-week low, now it’s a time to take reliance out of the green bucket and put it in the red bucket for 52-weeks low, until reliance makes a new 52-week high it will continue to remain the red bucket only.

After few months the reliance industries made a 52-week high, so now it’s a time to shift the reliance industries from red bucket to the green bucket, and it remained in the green bucket until 2023, in 2023 it has got shifted to the red bucket because of a new 52-week low.

Suppose if it neither makes 52-weeks high nor makes a 52-weeks low, then in that case, the reliance industries will not be in either of these two buckets.

In a nutshell, the 52-week High-Low Breadth answers the question of, in an index like Nifty50, how many scrips are in green bucket (52-week high) and how many scrips are in in red bucket (52-week low). The greater the number of scrips in green bucket (52-week high) the stronger the index is said to be, the greater the number of scrips in the red bucket (52-week low) the weaker the index is said to be. The 52-week high-low breadth is nothing but just this bucket way of looking at an index or the market.

Let’s see an example of 52-week high-low Breadth,

The above chart is Nifty50 index from Jan 2020 to Dec 2020, with 52 Period High-Low Breadth indicator at the bottom. The 52 Period High-Low Breadth indicator is scaled from 0% to 100% and pink dotted horizontal lines are drawn at 25%, 50% and 75% respectively. The green line represents the green bucket (52-week high) and the red line represents the red bucket (52-week low).

The reason why it is scaled from 0% to 100% is because so that irrespective of the number of constituents for any indices, we shall continue to look at it with the same eyes, also it makes the relative analysis with other index easier.

In the above chart of Nifty50, in the period of march 2020, in the 52 Period High-Low Breadth indicator the red line shows 68%, I’ve highlighted it with a red circle. The 68% of red line means, 68% of scrips (34 scrips) of Nifty50 are in red bucket (52-weeks low) and the green line shows 0% which means there are no scrips in the green bucket (52-weeks high).

So, the position of the green line and the red line tells you the picture of how strong a particular index is based on the underlying constituent’s strength. To further explore this Breadth Index by yourself, follow the steps below.

Below is the screenshot of the result, Nifty50 chart is displayed for the given period and below which is the 52 Period High-Low Breadth Indicator of Nifty50.

Feel free to play around this bread indicator for different groups to make your understanding better.