The Ultimate Guide to ‘RELATIVE STRENGTH (RS)’...🎯
WAIT… This is NOT RSI that you use day in & out…
Rather a very IMPORTANT indicator that can CHANGE the way YOU trade/invest…🤓
So, hang on as I explain this with #TATASTEEL chart...
Let’s go 🧵…
1⃣ But, how will it change the way I trade?
- Ever wondered why the stock you are holding is not moving when the market is ripping higher?
Ex: ITC didn't move btwn June’20 & Feb’22 while the market rallied
This indicator will help you get rid of such underperforming stocks.
2⃣ ok, what’s RS?
When stock A goes...
- up faster than Nifty, it is STRONG/OUTPERFORMING relative to Nifty
- down faster than Nifty, it is WEAK/UNDERPERFORMING relative to Nifty
So, RS is relative performance of a stock compared to any benchmark (refer chart for example)
3⃣ Let’s dig deeper:
A stock is outperforming/strong when
- Nifty is going up, but the stock is going up much faster than Nifty
- Nifty is going down, but the stock is going down much slower than Nifty or going up
4⃣ More definitions:
A stock is underperforming/weak when
- Nifty is going down, but the stock is going down much faster than Nifty
- Nifty is going up, but the stock is going up lesser than Nifty or going down