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Bullish Percent Index (BPI)

Updated on October 18, 2011

Is the BPI a valuable tool to a stock trader? In my opinion the answer to that question is, "YES!"

What is the BPI? First of all the initials stand for the Bullish Percent Index. This is a listing of the number of stocks on a bullish point and figure buy signal of a certain index. In the picture that I have added to this HUB you see the New York Stock Exchange BPI.

Therefore, if you looked at the thousands of stocks traded on the NYSE with a P&F chart you will notice a few things. By the way this chart is current as of the day that I am writing this HUB. Here is what we see:

1. The P&F Chart is currently in a column of "X's". This means that demand is currently in control

2. We are currently in a P&F buy signal which means that the momentum of the market is moving up.

3. Currently 42.72% of all stocks on the NYSE are on a buy signal. That is obviously less then half, but according to the movement of this chart we are seeing more and more stocks move to a buy signal. When the BPI is less then 30% and then moves up this is a good sign that the bulls are coming back into control.

Why is all of this important as I make decisions to trade? Because if I just look at the external market - the DOW, S&P, NYSE, etc I might be wondering what the market was doing. If you were to look at candlestick charts on these indexes you may come to the conclusion that we are trading flat as we bounce violently up and down within a trading range.

However, as we look at the BPI we see that strength is gaining in the market. As more and more stocks (the majority being the less weighted stocks moving first) move to a buy signal we sign where the momentum of the market is heading. While things can always change some bizarre news, seeing what is happening on the inside of the market could give us a bias toward the next trend.

We probably don't want to trade solely off what the BPI is doing, but the BPI is a very handy tool that can help you see trends before they become evident in the external market and help you get out of positions before the current trend changes.

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    • profile image

      Jarmin 

      6 years ago

      Good explanation, I've often wondered about these

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