TICK Is an Important Market Sentiment Tool
Are There More Stocks Rising or Falling?
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.
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.