The Advance/Decline Line is an indicator that tracks how many stocks are advancing or declining on a daily basis. Each day you take the total number of stocks that increased in price and deduct the total number of stocks that decreased in price. You then add the difference to the number from the previous day.
In a bull market if the Advance/Decline Line is rising that shows increasing breadth and therefore broad support for the upward move. However, if the Advance/Decline Line slows its rise and starts falling during a bull market that indicates decreasing breadth and hence a divergence and means a trend reversal is increasingly likely.
The converse is the case in a bear market. If the Advance/Decline Line is falling that shows more and more stocks are participating in the bear market. If the Advance/Decline Line slows its decline and starts rising in a bear market, that is a divergence and indicates a likely reversal of the downward market trend.
