# Technical Analysis from A to Z

by Steven B. Achelis

NEW HIGHS-NEW LOWS

Overview

The New Highs-New Lows indicator ("NH-NL") displays the daily difference between the number of stocks reaching new 52-week highs and the number of stocks reaching new 52-week lows.

Interpretation

You can interpret the NH-NL indicator as a divergence indicator or as an oscillator. I usually plot a 10-day moving average of the NH-NL indicator to smooth the daily values.

Divergence

The NH-NL indicator generally reaches its extreme lows slightly before a major market bottom. As the market then turns up from the major bottom, the indicator jumps up rapidly. During this period, many new stocks are making new highs because it's easy to make a new high when prices have been depressed for a long time.

As the cycle matures, a divergence often occurs as fewer and fewer stocks are making new highs (the indicator falls), yet the market indices continue to reach new highs. This is a classic bearish divergence that indicates that the current upward trend is weak and may reverse.

Oscillator

The NH-NL indicator oscillates around zero. If the indicator is positive, the bulls are in control. If it is negative, the bears are in control. You can trade the NH-NL indicator by buying and selling as the indicators passes through zero. This won't always keep you on the right side of the market, but it is helpful to confirm the current trend.

Example

The following chart shows the S&P 500 and a 10-day moving average of the NH-NL indicator.

I used the NH-NL indicator to confirm a traditional moving average trading system. I drew "buy" arrows when the S&P 500 rose above its 50-day moving average, but only if the 10-day moving average of the NH-NL indicator was above zero. I drew "sell" arrows anytime the S&P 500 fell below its moving average.

By ignoring buy signals unless the 10-day moving average of the NH-NL indicator was above zero, I reduced the number of trades by 50% and increased profits by 9%.

Calculation

The New Highs-New Lows is calculated by simply taking the difference between the number of stocks that made new 52-week highs and the number of stocks that made new 52-week lows. I usually plot a 10-day moving average of this value.

*Technical Analysis from A to Z*is reproduced here with permission from the author and publisher.

### Contents

- Preface
- Acknowledgments
- Terminology
- To Learn More
- Bibliography
- About the Author
- Technical Analysis
- Price Fields
- Charts
- Support & Resistance
- Trends
- Moving Averages
- Indicators
- Market Indicators
- Line Studies
- Periodicity
- The Time Element
- Conclusion
- Absolute Breadth Index
- Accumulation/Distribution
- Accumulation Swing Index
- Advance/Decline Line
- Advance/Decline Ratio
- Advancing-Declining Issues
- Advancing, Declining, Unchanged Volume
- Andrews' Pitchfork
- Arms Index
- Average True Range
- Bollinger Bands
- Breadth Thrust
- Bull/Bear Ratio
- Candlesticks - Japanese
- CANSLIM
- Chaikin Oscillator
- Commodity Channel Index
- Commodity Selection Index
- Correlation Analysis
- Cumulative Volume Index
- Cycles
- Demand Index
- Detrended Price Oscillator
- Directional Movement
- Dow Theory
- Ease of Movement
- Efficient Market Theory
- Elliott Wave Theory
- Envelopes (Trading Bands)
- Equivolume/Candlevolume
- Fibonacci Studies
- Four Percent Model
- Fourier Transform
- Fundamental Analysis
- Gann Angles
- Herrick Payoff Index
- Interest Rates
- Kagi
- Large Block Ratio
- Linear Regression Lines
- MACD
- Mass Index
- McClellan Oscillator
- McClellan Summation Index
- Median Price
- Member Short Ratio
- Momentum
- Money Flow Index
- Moving Averages
- Negative Volume Index
- New Highs-Lows Cumulative
- New Highs-New Lows
- New Highs/Lows Ratio
- Odd Lot Balance Index
- Odd Lot Purchases/Sales
- Odd Lot Short Ratio
- On Balance Volume
- Open Interest
- Open-10 TRIN
- Option Analysis
- Overbought/Oversold
- Parabolic SAR
- Patterns
- Percent Retracement
- Performance
- Point & Figure
- Positive Volume Index
- Price and Volume Trend
- Price Oscillator
- Price Rate-of-Change
- Public Short Ratio
- Puts/Calls Ratio
- Quadrant Lines
- Relative Strength, Comparative
- Relative Strength Index
- Renko
- Speed Resistance Lines
- Spreads
- Standard Deviation
- STIX
- Stochastic Oscillator
- Swing Index
- Three Line Break
- Time Series Forcast
- Tirone Levels
- Total Short Ratio
- Trade Volume Index
- Trendlines
- TRIX
- Typical Price
- Ultimate Oscillator
- Upside/Downside Ratio
- Upside/Downside Volume
- Vertical Horizonal Filter
- Volatility, Chaikin's
- Volume
- Volume Oscillator
- Volume Rate-of-Change
- Weighted Close
- Williams' Accumulation/Distribution
- Williams' %R
- Zig Zag