How to Interpret the RS Phases and Divergences Indicator #
The RS Phases and Divergences indicator is a way to identify periods of Relative Strength. This indicator was created in colloboration with Deepvue Founder Joe Carvalho.
It highlights when a Stocks Relative Strength Line is diverging from a chosen index, by default the SPY.
When the RS Line is increasing as the SPY is declining, the indicator will highlight this with a blue background. When the RS line is declining as the SPY is increasing, the indicator will highlight this with a red background. It will also highlight these areas if the slopes of the RS and SPY are considerably different.
The columns highlight the strength of the divergence and a more day to day expression of RS.
This indicator is particularly helpful for analyzing stocks during corrections and finding stocks that are resisting the market decline.
Examples #
Here you can see and example of the indicator on a weekly chart with TSLA in 2020. The indicator highlights the subtle RS as the RS line declines at a shallower slope than the market
This preceded TSLA's model book move after the 2020 correction
GEV showed a positive RS Phase during it's base amid the market correction
In 2022 and 2023 ELF showed numerous RS phases before making it's model book move
in 2024 ELF showed a negative RS phase before breaking down and dropping nearly 50%
