High-Low Index Indicator | Indicator Series

The High-Low Index indicator compares stocks that are reaching their 52-week high with the stocks that are reaching their 52-week low in broad markets or indexes like the FTSE/JSE Top 40 Index or the S&P 500 Index.  (Try out indicators on Tradingview.com)

By doing this comparison, the indicator can confirm an overall trend.   The market is bullish if this indicator is rising or positive and bearish if the indicator is dropping or negative.  

A 10-day moving average is applied to the record high percentage to create the high-low index because, with a market or index that is sometimes volatile on a day-to-day basis, this helps smooth the daily swings.

The graph ranges from 0 to 100.

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Bullish or Bearish Market or Index.

If the signal passes over 50, that means there are more assets trading at 52-week highs than 52-week lows.  This signals a bullish market.

Conversely, if the signals cross down below the 50 levels, more assets are trading at 52-week lows than 52-week highs and signals a bearish market.  

Trends

If the high-low readings are consistently over 70, this can indicate the market or index is trending higher.  On the other hand, if the high-low readings are consistently below 30, this can indicate a downward trend.

Buy And Sell Signals

To indicate buy and sell signals, this indicator should be used with other technical analysis tools, such as the relative strength index (RSI).

A 20-day moving average can be added to the high-low index.  If the high-low index signal crosses above the 20-day moving average, this can indicate a buy signal.

On the other hand, if the high-low index signal crosses below the 20-day moving average, this can signify it’s time to sell.

By adding the RSI, the momentum can be confirmed if the RSI signal is above a certain level like 0.

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