What Is Relative Strength And Why It Matters

Relative Strength (RS) gauges a stock’s performance against a major benchmark, such as the S&P 500 or Nasdaq. By integrating the RS Rating into technical analysis, investors can pinpoint stocks that are outperforming the general market movement.

When you’re trading stocks, your goal is to spot the momentum that propels stocks to outshine others. Achieve superperformance in each market cycle by focusing on stocks that are moving faster than the broader market.

Historically, stocks exhibiting a higher Relative Strength Rating tend to perform better than those with lower RS Ratings. When you’re screening for stocks to invest in, prioritize those with elevated RS Ratings.

One of the easiest ways to find stocks with strong Relative Strength is by using the Deepvue Relative Strength (RS) Rating. Let’s break down how it works and how you can use it to identify potential winners.

Understanding The RS Rating

At its core, the Deepvue Relative Strength Rating measures a stock’s performance against all other stocks.

The RS Rating evaluates how a stock’s price has moved over a specific timeframe and then benchmarks this performance against all other stocks. The Relative Strength Rating distinctly indicates whether a stock’s price performance is leading or lagging the market.

Deepvue provides Relative Strength Ratings that evaluate a stock’s performance over four different time periods: 12 months, 6 months, 3 months, and 1 month. This gives investors a broader view of a stock’s relative strength across different timeframes.

The Relative Strength Rating is simply a number within a range of 1 (the worst) to 99 (the best).

• A rating of 90 indicates that the stock is performing better than 90% of all other stocks
• A rating of 15 indicates that the stock is performing better than only 15% of all other stocks

The Deepvue Relative Strength Rating Explained

The Deepvue Relative Strength Rating is calculated by taking a weighted average of a stock’s performance over different time periods. Recent performance is given more weight than older performance to keep the rating current and relevant.

Short-term performance captures the most immediate trends in stock movements and is particularly useful for identifying stocks with quick momentum bursts.

• 1-Month and 3-Month RS is ideal for focusing on stocks experiencing rapid price changes and assessing the strength of newly listed IPOs.

Medium-term performance offers a balanced view between short-term volatility and longer-term trends providing insight into whether a stock’s performance is sustainable.

• 6-Month RS serves as an intermediate metric for investors interested in medium-term price trends ranging from a couple of months to under one year.

Long-term performance: is essential for understanding a stock’s enduring strength for over a year.

• 12-Month RS is the most commonly referenced timeframe, especially in growth-oriented investment strategies like CANSLIM, where investors can identify stocks with strong long-term price trends.

Identifying Strong vs. Weak Stocks

The best stocks have a Relative Strength Rating of at least 80 before they begin their price advance. Similar to looking at stocks that have a Relative Strength Line making new highs, look for stocks that have a continuously increasing RS Rating over time.

By understanding and utilizing the Deepvue RS Rating, investors can target stocks likely to outperform their peers in the market. This metric not only aids in identifying stocks with strong performance but also helps in recognizing leading groups.

To make even better decisions, you can combine the Relative Strength Rating with other metrics like Earnings Per Share (EPS) or Sales. This helps you get a more complete picture of a stock’s overall potential.

Deepvue’s Data Panel

Click on the Data Panel Icon to open all customizable settings.

To optimize your trading strategy, design a tailored Data Panel focused on Relative Strength (RS) metrics. Here’s how you can customize it:

• Select Your Timeframe: Adjust the time periods for which you want to analyze Relative Strength. This flexibility allows you to align the RS data with your trading horizon, whether you’re a day trader, swing trader, or long-term investor by focusing on 1 day, 1 week, 1 month, or multiple months.
• Integration With Your Trading Strategy: If your strategy involves other factors like volume, volatility, or fundamental data, integrate these ratings into your data panel alongside other performance metrics. Add the RS Rating to accompany EPS and Sales data, ADR or ATR percentages, and Average Volume.

Deepvue’s Column Settings

In a similar fashion to the Data Pabnel, Deepvue users can create custom Column Settings to tailor to their needs.

To enhance your trading approach, create a custom Data Panel centered on Relative Strength (RS) indicators. Here’s how you can adapt it to your needs:

• Timeframe Comparisons: Compare how the RS Rating has changed from a shorter to a longer timeframe. Choose the periods over which you analyze Relative Strength, whether it’s weekly or monthly, and look for an increasing RS Rating.
• Add Other Momentum Indicators: Create a quick visual for analyzing the strength of a stock’s trend. Add Daily and Weekly Closing Ranges, Volume Run Rate, and other Industry Rankings.

Personalizing your Data Panel and Column Settings with these elements enables powerful tools at your fingertips to help identify the best stocks by focusing on Relative Strength. With these personalized settings, your dynamic workspace helps quickly filter stocks to easily analyze and react to stock performance trends.

How To Find Stocks With Strong Relative Strength: Screening For Stocks With High RS Ratings

Whether you’re a new investor or an experienced trader, understanding the Deepvue Relative Strength Rating can help you navigate the stock market more effectively. Incorporate the RS Rating into your screening routine to ensure you are looking at stocks outperforming the market.

Look for stocks that have an RS Rating of 80 or above with simple liquidity parameters.

Look for stocks that have an RS Rating of 80 or better across multiple timeframes.

Leveraging The Relative Strength Rating In Your Stock Analysis

The Deepvue Relative Strength Rating is a powerful tool for investors. It provides a clear, easy-to-understand metric for assessing how a stock is performing compared to others in the market.

Your objective is trading stocks with huge momentum that are outperforming the market. Concentrate on stocks that are continuously showing Relative Strength every day.

A high RS Rating indicates positive momentum as the stock is performing well relative to other stocks. A low RS Rating indicates negative momentum as the stock is performing poorly relative to other stocks.

Focus on stocks with an RS Rating over 80. The best stocks often show a rating above 90 as they start to trend higher.