From Nasdaq.: 2024-07-03 08:30:00

Relative Strength (RS) is a price-based analysis used to evaluate a stock’s performance versus a benchmark like the S&P 500 Index. RS is not a signal, has different applications, and differs from Relative Strength Index (RSI). In a weak market, stocks with RS outperform, presenting trading opportunities such as Super Micro Computer’s rise during a bear market.

RS can also be used to evaluate how a stock reacts to news, like Coinbase Global’s recovery post SEC charges. Comparing a stock’s performance to peers or a commodity is crucial for assessing RS, an example being Marathon Digital’s strength during Bitcoin’s dip. Utilizing RS can provide insights into a stock’s strength and potential for growth.

Tips for using RS include sorting watch lists by % change on down days, focusing on stocks that hold up well, and observing related stocks and commodities to gauge strength. RS should be used in conjunction with a full investing framework to make informed decisions. Relative Strength is a powerful indicator for identifying strong stocks and gaining a trading edge.

Read more at Nasdaq: A Powerful Investing Tool: Know a Stock’s Relative Strength