New High-Low Breadth Indicator

What is New High and New Low?

A new high is nothing but the highest price a stock has ever achieved in its lifetime, and for the new low it is nothing but the lowest price a stock has ever achieved in its lifetime.

You may have a doubt here regarding all-time lows, how come a stock can make all time low?

Well, different stocks get listed in exchange at different prices, for example Paytm (one 97 communications)

Was listed in NSE exchange on Nov 18, 2021, it opened at Rs.1950, since then it made several all-time new lows to arrive at a price of Rs. 438.35 in November 2022, that’s how a stock makes it all time new lows.

New High-Low Breadth Indicator is not so different from 52 Weeks High-Low Indicator, instead of looking for New Highs or Lows for every 52 Period, here in this New High – Low Breadth Indicator, we will be looking for New Highs and Lows for the Lifetime. No matter how many 52 period highs and lows a scrip makes, unless and until that’s a new all time high or low, it will never be considered.

Below is the share price of Paytm on a weekly basis since the day 1.

In the above example, we can see that Paytm got listed on NSE exchange on Nov 18 2021, it opened at the price of Rs.1950 and went to a high price of Rs.1955 on the same day, that Rs.1955 became an all time high and it is market with a horizontal blue dotted line, and from Nov 18 2021, Paytm couldn’t go up further instead it continued going down further.

The very next week Paytm hit a low price which I’ve marked as A with a dotted horizontal red line, and then it retraced back up in the following weeks, at that point that was the all time low price pf Paytm, so we kept a tag of Paytm at all time low, and then again Paytm started falling and it broke below A and reached the Point B, at that time that was the another all time new low, like wise Paytm kept breaking new lows for months, and every time a new low was hit, Paytm gets marked with a tag of all time low.

And for the all-time highs, same process is followed, whenever a scrip makes a new all time high, it gets tagged as all time high.

I hope now you’re clear with how all time high and all time low is made by any stock. So, if we take an index like Nifty50, then if we look for scrips which have made all time new high or all time new low like the above examples, consider that we have got 5 scrips which have made all time new highs and 2 scrips which have made all time new lows, then the New High-Low Breadth indicator would show a reading of 10% for new high line because Nifty50 has 50 constituents, so 5 out of 50 is 10%. And for all time new low reading the New High-Low Breadth indicator would show a reading of 4% because (2 out of 50 scrips). This is how the New High-Low Breadth Indicator is created.

Now let’s take an example of Nifty 100.

Above is the example of New High-Low Breadth Indicator applied in Nifty 100 Index.

The chart is a daily timeframe candlestick chat of Nifty 100 from 1^st Jan 2022 to 12^th June 2023, and below the price chart is the New High-Low Breadth Indicator with green and red lines.

How to interpret this New High-Low Breadth Indicator?

This indicator is scaled from 0 to 100 and it is represented in percentages.

If you look in the chart, somewhere after Aug’22, the reading on the green line was 12%, I’ve circled it and highlighted the reading with a rectangle box on the indicator panel. What this tells us is, for that given point in time, nearly 12% of the constituents of Nifty100 made an all-time new high and there were no scrips which made an all-time new low at that point.

The greater number of percentage reading for the green line, the stronger the index is said to be, you should turn doubtful about the strength of the index only when you see the index has been making new highs but with a lesser and lesser number of constituents participating, that’s when probably the exhaustion of an uptrend or a temporary halt for the uptrend may come.