The Breadth Ratio is a volume ratio composed of volume flowing into up stocks versus volume flowing into down stocks.
The breadth ratio is expressed: Up Volume / Down Volume
This reading is important in relation to where it has been, especially where we are now compared to where we opened on the day.
If at 10:00 AM we have 10M shares moving up and 5M shares moving down, the resulting breadth ratio is 2:1 positive (10M/5M), twice as much volume is flowing into up stocks as down stocks.
If at 10:30 AM the market has sold off but we now have a breadth ratio of 3:1 positive, this is a signal that the markets are actually becoming stronger and it’s time buy the pullback, so look for a long setup.
The image above displays the NYSE and NASDAQ opening breadth numbers for the day (NBO). The current breadth reading is currently shown to the right (in red).
Here’s how to add the Thinkorswim breadth box code to your charts.
Out of all four internals, the breadth ratio is considered the most important.