Relative Strength Comparison

Type

Trend Indicator – price comparison

How does it work?

The relative strength comparison compares two securities to see how they are performing comparatively.

Relative strength compares a securities price with that of a ‘base’ security. Sharechart uses the XAO (All Ordinaries index) as its default base security whilst in the Australian Market.

The default can be easily changed, if for any reason you wish to compare two different securities against each other. To do this go to Settings<Indicators and from the drop down box select Relative strength comparison. Insert the nominated security into the base code box and the date from when you wish to compare the security.

Trading Signals

When the relative strength comparison is moving up, the security is out-performing better than the base.

When the relative strength is moving down, the security is performing worse than the base (not rising as fast or falling faster).

When the relative strength is moving sideways the security and the base are performing the same (rising and falling at the same percentages).

Settings

Sharechart Default:

All Ordinaries Index (XAO) Australian Market

Dow Jones Ind. Index (DJI) USA Market

Note: Adjust comparison “date from” accordingly to your trading time frame

Example

The share price for Leighton Holdings Ltd (LEI) under-performed the Australian All Ordinaries Index (XAO) between February and June 2003. However, LEI out-performed the XAO from September through to November 2003.

The setting for the Relative Strength Comparison (RSC) for the graph above was 13 periods. It can be modified: go to Settings > Indicators > Relative Strength Comparison (RSC).