Stock Investment (7) Technical Terms

1. Advance-Decline Ratio

Meaning
An indicator used to measure whether the market as a whole is overheated or oversold.
Calculated as '(Number of advancing stocks ÷ Number of declining stocks) × 100' over a certain period (generally 25 days).


Guidelines
• 120 or higher: Overbought (selling pressure is likely to occur)
• 70 or lower: Oversold (rebound is likely to occur)

Example
The Advance-Decline Ratio of Nikkei 225 stocks exceeds 130 → High short-term overheating. Profit-taking is likely to occur, and a correction is likely within a few days to a few weeks.

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2. Margin Ratio (Margin Trading Ratio)

Meaning
The ratio of 'margin buying' to 'margin selling' in margin trading. An indicator to measure the bias in investor positions.


Guidelines
• High ratio (e.g., 5x or higher): High margin buying → Panic selling is likely when stock prices fall (selling pressure)
• Low ratio (less than 1x): High margin selling → Short squeezes are likely to occur (buying pressure)

Example
A stock's margin ratio is 8x → Individual investors are biased toward buying, and if the price falls, stop-loss orders are likely to concentrate.

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3. Reverse Daily Fee (Gyaku-hibu)

Meaning
A 'stock lending fee' that occurs when there is a lot of margin selling (short selling) and the side lending the stock is in short supply.
Investors who are short selling must pay this reverse daily fee.

Occurrence Conditions
• When short selling balances increase and the securities finance company's supply of lendable stocks is insufficient
• Likely to occur mainly for stocks with shareholder benefits or just before high-dividend record dates

Impact on the Market
• When the reverse daily fee becomes expensive, short selling costs surge → Buying back of short positions (short squeeze) creates upward pressure on stock prices

Example
A reverse daily fee of 5 yen per day occurs for a popular shareholder benefit stock → Continuing to short sell becomes a heavy cost burden, strengthening buying pressure.

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4. Short Selling Balance (%)

Meaning
The ratio of short selling positions to the total number of issued shares.
It indicates the potential for selling pressure and also serves as a basis for judging the risk of a short squeeze.

Guidelines
• High level (5% or higher): Short selling has accumulated, making it easy to fall on bad news, but also easy to surge (short squeeze) on good news
• Low level (less than 2%): Selling pressure is limited

Example
A stock with an 8% short selling balance → Surges on good news such as a new product announcement → Short sellers rush to buy back, and the stock price rises sharply in the short term.

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5. Combined Use of 4 Indicators

The accuracy of these indicators increases when they are analyzed in combination rather than individually.

Case where selling pressure is likely (Example)
• Advance-Decline Ratio: 130 (Overheated)
• Margin Ratio: 7x (Biased toward buying)
• Short Selling Balance: Low level (Few short sellers)
→ Too biased toward buyers, room for upside is limited. Panic selling is likely to accelerate when prices fall.

Case where buying pressure is likely (Example)
• Advance-Decline Ratio: 70 (Oversold)
• Margin Ratio: 0.8x (Sellers dominant)
• Short Selling Balance: 7% (Many short sellers)
• Reverse daily fee occurs (Short selling costs soar)
→ Short sellers' buybacks surge, making a short-term short squeeze likely.