Technical analysts believe that some of the key elements of market behavior—called technical indicators-can provide valuable insights about the condition of the market. Briefly discuss each of the following indicators
• Market volume
• Breadth of the market
• Short-interest
• Odd-lot trading
What will be an ideal response?
Answer: Market volume reflects the level of investor interest. The market is strong when volume increases in a rising market or drops in a declining market.
Breadth of the market analyzes the spread between the number of stocks that advance in price and the number that decline. The market is strong when the number of stocks advancing exceeds the number that are declining.
Short interest refers to the number of stocks sold short. The future market is viewed optimistically when the level of short interest is relatively high.
Odd-lot trading is used to determine the sentiment of small investors. The theory is that the best investment strategy is to do the opposite of what the small investor is doing.
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