How To Read Stock Charts: Relative Strength


the relative strength line is an
indicator that you can use to help confirm your buying decisions take a
look at this chart from IBD’s MarketSmith service the relative strength
line is the blue line on the chart and it measures the stocks price performance
versus that of the S&P 500 which is used to represent the overall market so if
you’re measuring a stock’s price move to that of the S&P 500 that can help you
determine whether or not the stock you’re thinking about buying is showing
out performance now if the relative strength line is trending down that
tells you the stock is lagging the overall market but if it’s trending
higher that means it’s outperforming the market furthermore if the relative
strength line hits a new all-time high that’s bullish and what’s even more
bullish is that the relative strength line hits a new high before the stock’s
price hits a new all-time high this chart also has a relative price strength
rating next to the relative strength line which is a little different while
the relative strength line measures the stock’s price performance versus the S&P
500 the relative price strength rating calculated by Investor’s Business Daily
measures the stock’s price performance versus all other stocks in our database
with 1 being the lowest and 99 being the highest think about these ratings like
grades on an exam a 90 or above is especially positive the takeaway here
make sure to buy stocks that are outperforming the market because that’ll
increase your chances of scoring big gains make sure to check out investors.com and MarketSmith where you can find screens of stocks with relative strength
lines at new highs and you can check out our full library of how to invest videos
at investors.com/howtoinvest

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