
August 6, 2024
What is Relative Strength in Stocks?
Relative Strength (RS) is an essential concept used to evaluate how a stock or group of stocks performs relative to the broader market or an index. This measurement helps determine whether a particular stock is outperforming or underperforming the market, providing key insights for traders and investors.
A stock with good relative strength rises more in a bull market or falls less in a bear market compared to the market average. Conversely, poor relative strength means the stock underperforms relative to the market.
Strong Relative Strength: If a stock or sector shows strong relative strength, it is outperforming the market.
- If the market rises by 10% and a stock rises by 20%, that stock has strong relative strength.
- If the market declines by 10% and a stock only declines by 5%, that stock is also showing good relative strength because it is falling less than the market.
Weak Relative Strength: If a stock or group underperforms the market, it exhibits poor relative strength.
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- If the market rises by 10% and the stock rises by only 5%, it demonstrates weak relative strength.
- If the market falls by 10% and the stock falls by 20%, it exhibits very poor relative strength.
Why is Relative Strength Important for Traders?
When trading individual stocks, you want to spot momentum that signals outperformance. Stocks with strong relative strength are often potential leaders, especially during market corrections or when individual stocks break out.
Relative Strength is one of the most powerful tools in a trader’s arsenal. It not only identifies the best stocks and sectors to trade but also ensures that trades are aligned with the market’s underlying momentum.
Identify Market Leaders
Detect Strength Early
Find Superperformance
Confirm Breakouts
Gauge Market Trends
Avoid Weak Stocks
RS is a critical tool for traders because it allows them to focus on the strongest stocks, align with market leadership, and increase their probability of success in achieving superperformance while avoiding laggards. But how do you find stocks exhibiting relative strength?
Platforms like Deepvue simplify the process with charting tools and screeners to help identify market-leading stocks. Below are five effective ways to screen for relative strength.
Look for Relative Strength Line New Highs
The Relative Strength Line is a visual representation of how an individual stock is performing compared to the overall market. Just like we look for stocks making new highs in price, watch stocks that have RS LInes making new highs.
Relative Strength is a leading indicator that corresponds directly to the price action of a stock. When an individual stock is outperforming the market, the RS Line points upward.
The RS line making new highs is significant because it indicates a stock is outperforming the overall market, even if its price hasn’t reached new highs yet. This is a powerful signal that the stock has institutional support and leadership potential.

Stocks with Relative Strength Lines at new highs are often leaders in their sectors or industries. New highs in the RS line suggest that the stock is in strong demand, often driven by institutional buying.
Stocks with similar breakout patterns, those with RS lines making new highs are more likely to be strong performers. Stocks with consistent RS strength are more likely to sustain advances, making them ideal candidates to become the next market leader.
Watch for Relative Strength Line New High Before Price
Stocks that are breaking out into new highs are often the next leading stocks of the market cycle – The same goes for stocks with RS Lines breaking into new highs. Depending on market conditions, the strongest stocks have RS Lines breaking out into new highs Before the Price of the stock.
In extremely weak market environments, stocks that are moving sideways will show RS compared to the broader market that is decreasing in price. This will cause the RS Line to trend higher while the price of the stock consolidates sideways.
When the RS line makes a new high before the price of a stock, it is an extremely bullish signal. This occurrence indicates that the stock is already outperforming the market and is likely gearing up for a significant price breakout.

When the RS line reaches a new high before the stock price, it shows that the stock is already outperforming the market even though the price hasn’t yet reached new highs. Essentially, the RS line acts as a leading indicator, foreshadowing a strong price move.
Stocks that demonstrate relative strength ahead of price action are usually market leaders. Traders should seek stocks where the RS Line consistently trends upward especially when it makes new highs ahead of the price.
Count Relative Strength Days
Relative Strength Days, are days in which a stock is showing relative strength compared to the broader market. Analyze a stock’s daily performance to consider how the price moved in relation to the action of the index.
Counting RS days is important because it helps traders identify and confirm the strength and consistency of a stock’s performance relative to the broader market over a specific period. This technique allows traders to pinpoint stocks that are not just briefly strong but are demonstrating sustained leadership.
Counting RS days allows traders to observe how often a stock closes relative to the market or its peers. In markets with mixed signals or increased volatility, counting RS days helps traders focus on stocks that are resilient and outperforming.

Stocks that exhibit RS Days over 60% of the time during market corrections are potential leadership stocks you want to focus on when the market turns. This “OR Group” is part of a Screener Preset that looks for stocks exhibiting RS Days over 60% of the time.
Counting RS days helps traders zero in on consistent outperformers and provides an objective measure of strength. Stocks that show a high number of RS days are often poised for significant gains and display the qualities of future superperformance stocks.
Pat Attention to the Highest Volume In a Year
Volume reflects the intensity of a stock’s price movement. When volume spikes dramatically, it signals that large participants, like institutional investors, are actively involved.
Monitoring the highest volume in over a year is critically important because volume acts as a confirmation tool for price movement and provides insights into the stock’s demand and future direction. Large volume spikes often indicate the presence of powerful institutional buying.
The highest volume in over a year is a key indicator of a change in trend and often occurs during critical turning points. At the start of an uptrend, large volume spikes signal fresh institutional buying while at the end of a long downtrend, it may signal capitulation.

The highest volume in over a year typically reflects unusual activity. Unexpected news or a drastic shift in fundamentals may catch investors off guard and require the need to change their positions quickly.
Huge volume when combined with price action and Relative Strength helps you identify the most reliable breakouts and avoid false moves. If volume increases during rallies or breakouts, it indicates strong conviction in the stock’s upward move.
Find Stocks Up On Down Days
When a stock closes higher while the overall market or its peers are down, it indicates that there is strong buying interest that outweighs general selling pressure. This is often a clue that institutions are actively accumulating shares, which sets the stage for future price advances.
The simplest, and one of the most important, screeners you can utilize is to look for stocks that are up when the market is down. When the market is experiencing selling pressure, look for stocks that are under accumulation.
Stocks that resist market declines are often the first to rebound when market conditions improve. Stocks that end the day with gains on days when the overall market is declining is an indicator that these stocks are poised to become market leaders.

Stocks up on down days tend to be resilient, even during market corrections or volatile environments. These stocks often recover faster and outperform once the broader market stabilizes or moves higher.
These stocks often show consistent buying interest, which fuels sustainable rallies and breakout moves. By identifying stocks that are up on down days, traders can pinpoint opportunities with strong buying support and improve their chances of selecting future leaders.
Real Examples of Relative Strength
Find Relative Strength Real-time Without Guessing
Screening daily for relative strength is important because it helps traders and investors identify stocks that are outperforming in real-time. By focusing on relative strength, traders can pinpoint leadership in any market environment.
Deepvue makes it easy to Find Leading Stocks Quickly with the use of screener presets and easily customized column settings. Remember: A stock showing strong daily RS indicates it is performing well relative to the broader market or an index, suggesting underlying demand and potential for further gains.

Add the Relative Strength Rating (1 Day) to your column settings and routinely sort by strength to see the best-performing stocks of the day. Routinely screen the Deepvue Leaders Screener Preset and sort by Daily RS.
A high RS rating indicates a stock is outperforming its peers or the market, reflecting demand and strength. Take special note of stocks with consistent appearances on your Relative Strength Screens over time, as this suggests that institutional investors are accumulating shares.
Key Takeaways for Finding Relative Strength Stocks
Relative Strength measures a stock’s performance against a broader market index.
The RS Line is a leading indicator of potential performance and provides a visual representation of a stock’s price action compared to the index. Look for stocks with RS Lines making new highs and pay close attention to stocks whose RS Line makes a new high before price
RS Days are any day in which the stock shows Relative Strength compared to the broader market. Focus on stocks with RS Days 60% of your trading timeframe.
Look for confirmation in trading volume. Be on the lookout for stocks with the highest volume in over a year especially when the price is breaking out to new highs or responds positively to recent news.
Relative Strength is simple. Identify stocks that are being accumulated when the market is selling off.
Whether you’re confirming breakouts, tracking consistent strength, or looking for early signs of momentum, RS is an invaluable tool.