Description
The Bullish Percent Index (BPI) is a technical analysis indicator that measures the percentage of stocks within a specific index or sector that are currently trading on a bullish point-and-figure chart pattern. It is used to gauge the overall market sentiment or the sentiment within a particular sector.
To calculate the BPI, identify which charts are showing a buy signal within the selected index or sector. Divide the number of stocks with buy signals by the total number of stocks in the index or sector and multiply by 100.
The BPI can be interpreted as follows:
A BPI reading above 70%: An indication of a bullish market
A BPI reading below 30%: An indication of a bearish market.
The BPI helps traders identify overbought or oversold conditions and potential turning points in the market. If the BPI is very high, it might suggest that the market is overbought and could soon turn down. If it’s very low, it could indicate the market is oversold and might soon start to rise.
Let’s use the S&P 500 Bullish Percent Index as an example.
This index is based on the point-and-figure charts of the 500 stocks that make up the S&P 500. Here’s how it works:
When more of these 500 stocks begin to display buy signals on their point-and-figure charts, the S&P 500 Bullish Percent Index tends to rise.
When more of these stocks show sell signals, the index typically declines.
Start Trading with Vantage
Access markets including forex, commodities, indices, shares/stocks and more, at low cost.
Start trading CFD stocks by opening a live account here, or practice trading with virtual currency with a demo account.
You can also sign up for our free, weekly webinars that will break down the current markets as well as discuss potential trade set ups for the week.
