Sunday, August 11, 2013

Fundamental Analysis - About Index

HERE A QUESTION MAY ARISE FOR EVERYONE? 
HOW THE STOCK MARKET INDEX RISES? 

Stock market traders are always concerned about which way the market is moving. A strong movement to buy is a good indicator that stocks price will continue to rise, while a strong movement to sell suggests a downturn is coming.

But how do you know which way the overall market is moving ?
One to the tools traders use is called market internals. These indicators can be early warning systems for the whole market.


One of the most common of the market internals is the TICK or TICK index.


This tool compares the number of stocks on the New York Stock Exchange that are rising to the number of stocks that are falling.


Also a stock price is mainly based upon Supply and Demand. If the supply is low and the demand is more then the stock prices rises. If the supply is more and the demand is low then the stock prices lowers. 


Similarly, depending upon the Weightage of the sector / stock ( also by the various news upcoming throughout the world, the price varies ) the stock prices are valued by the investors. 

The calculation is very simple. You take the upticking (or rising) stocks and subtract the downticking (or falling stocks).


If the number is positive, that means more stocks are rising than falling. If the number is negative, that means more stocks are falling than rising.


When the TICK approaches +1,000 or -1,000, watch out. These extremes indicate a severely overbought or oversold condition.


In either case, expect the market to abruptly reverse itself.


Understanding the TICK can help you decide when to buy or sell.


If you have been thinking about selling a particular stock and notice the TICK is approaching +750 or more, it may be time to sell since conditions are ripe for the market to reverse itself and begin falling.


That could bring down the price of your stock.


Always use the TICK in connection with other factors to make your decision. However, as a quick read on market sentiment, the TICK is a valuable tool.

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