Momentum and relative strength
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Relative strength compares a stock's performance with the whole market's. A rating of 85 means the stock beat 85% of the market over the measured window. These recipes find the leaders, and trends where more than one indicator points the same way.
Relative strength ranks what has already happened. Use it to choose which names to study, then read the chart for timing.
Recipes
Relative Strength Leader
Stocks worth $500M or more with a relative strength rating of 85 or higher, in an uptrend where the 50-day average sits above the 200-day.
Filters
- Market cap≥$500M
- Relative strength vs market≥85
- SMA(c,50)>SMA(c,200)
- How to use it
Sort by relative strength and open the top names. Check whether each one is extended far above its 50-day average or resting near it.
- Warning
Leaders get crowded. A stock can keep a high rating for weeks after its move has stalled.
Leaders in Strong Groups
Super planStocks with a relative strength rating of 80 or more whose own sector or thematic ETF also trends strongly (Group Strength 10 or more).
Filters
- Group strength≥10
- Relative strength vs market≥80
- How to use it
Check the group first. Several matches from one sector point to the sector moving, not one company.
- Warning
Group Strength settles at the end of the day, so during the session it shows yesterday's group trend.
Triple Momentum
Three momentum signals agreeing on the daily chart: RSI above 55, the 20-day average above the 50-day and the MACD line above its signal line.
Filters
- RSI(c,14)>55
- SMA(c,20)>SMA(c,50)
- MACD(c,12,26,9)>MACD(c,12,26,9)
- How to use it
Look at how long each stock has met all three. A name that just qualified differs from one that has qualified for a month.
- Warning
All three signals come from the same price history, so they agree more often than three independent tests would.
Three White Soldiers
Three up candles in a row, each closing higher, in the last 5 bars, in stocks trading over $5M a day where the 50-day average sits above the 200-day.
Filters
- SMA(c,50)>SMA(c,200) (within 5 bars)
- SMA(bar_dollar_volume,50)>5M
- Daily 3whitesoldiers candlestick pattern within the last 5 bars
- How to use it
Treat it as a continuation check: the trend exists, and buyers pressed it again. Check the size of the three candles against the stock's usual range.
- Warning
Three long candles in a row can leave a stock stretched, and the next bars often pull back.
Quick reference
Tips
- Add Relative strength vs market≥90 to any recipe here to keep only the top tenth of the market.
- Compare a leader with its group. A stock rising while its sector ETF falls is a different situation from one rising with it.
- The CANSLIM preset pairs relative strength with earnings growth.