Question 75—Trading with the New High-New Low Index
Answer 2 Selection “New Highs are the leaders in weakness and New Lows are the leaders in strength” is incorrect.
New Highs are the leaders in strength—they are the stocks that have reached their highest point for the past 52 weeks on any given day. New Lows are the leaders in weakness—the stocks that have reached their lowest point for the past 52 weeks on that day. Tops and bottoms in the stock market tend to be asymmetrical. Tops are formed more slowly and often show bearish divergences of NH-NL. Bottoms are formed faster and often marked by panicky downspikes of NH-NL, as losers dump their shares on the market, creating an opportunity for savvy bulls.
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