{"id":12766,"date":"2022-06-27T07:58:21","date_gmt":"2022-06-27T11:58:21","guid":{"rendered":"https:\/\/morpheustrading.com\/blog\/?p=12766"},"modified":"2023-01-25T09:26:26","modified_gmt":"2023-01-25T14:26:26","slug":"relative-strength","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/relative-strength\/","title":{"rendered":"Relative Strength: The Key Secret to Finding Top Stocks in any Market"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/new.morpheustrading.com\/blog\/wp-content\/uploads\/2022\/06\/relative-strength-1-718x335.jpeg\" alt=\"relative strength trading\" class=\"wp-image-12780\" width=\"715\" height=\"332\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2022\/06\/relative-strength-1-110x51.jpeg 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2022\/06\/relative-strength-1-768x358.jpeg 768w\" sizes=\"auto, (max-width: 715px) 100vw, 715px\" \/><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength\/#Relative_Strength_is_a_prime_technique_for_consistently_picking_the_best_stocks_for_swing_trading_in_both_bull_and_bear_markets_Heres_how_you_can_start_profiting_from_it_today%E2%80%A6\" >Relative Strength is a prime technique for consistently picking the best stocks for swing trading in both bull and bear markets. Here&#8217;s how you can start profiting from it today&#8230;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength\/#How_Relative_Strength_works_to_increase_your_trading_profits\" >How Relative Strength works to increase your trading profits<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength\/#Two_ways_to_quickly_and_easily_identify_Relative_Strength\" >Two ways to quickly and easily identify Relative Strength<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength\/#Two_hot_stocks_with_relative_strength_now\" >Two hot stocks with relative strength now<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength\/#Daqo_New_Energy_DQ\" >Daqo New Energy ($DQ)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength\/#Jinko_Solar_JKS\" >Jinko Solar ($JKS)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength\/#Maintaining_a_Relative_Strength_Watchlist\" >Maintaining a Relative Strength Watchlist<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength\/#WHAT_to_buy%E2%80%93not_WHEN_to_buy\" >WHAT to buy&#8211;not WHEN to buy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/morpheustrading.com\/blog\/relative-strength\/#Summary\" >Summary<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Relative_Strength_is_a_prime_technique_for_consistently_picking_the_best_stocks_for_swing_trading_in_both_bull_and_bear_markets_Heres_how_you_can_start_profiting_from_it_today%E2%80%A6\"><\/span>Relative Strength is a prime technique for consistently picking the best stocks for swing trading in both bull <em>and<\/em> bear markets. Here&#8217;s how you can start profiting from it today&#8230;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The amazingly reliable strategy of identifying relative strength has been the core foundation behind <em>thousands<\/em> of winning <a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\">Morpheus stock picks<\/a> since 2002.<\/p>\n\n\n\n<p>In this article, we show you how relative strength trading works, including two actual examples of stock charts with high top relative strength.<\/p>\n\n\n\n<p><em>Continue reading <\/em>to discover how to dramatically improve your stock picking success with the power of relative strength trading!<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_Relative_Strength_works_to_increase_your_trading_profits\"><\/span>How Relative Strength works to increase your trading profits<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The basic concept of Relative Strength is to identify stocks that are outperforming the broad market indexes&#8211;in both up <em>and<\/em> down markets.<\/p>\n\n\n\n<p>Stocks with high relative strength score bigger gains than the Nasdaq and S&amp;P 500 during rallies, while also falling less when stocks move lower.<\/p>\n\n\n\n<p>If a stock is so strong that it merely moves sideways while the Nasdaq is down sharply, what happens to the stock price when the Nasdaq eventually bounces as well?<\/p>\n\n\n\n<p>The stock with top relative strength will be the first to explode higher and lead the Nasdaq.<\/p>\n\n\n\n<p>Conversely, if the major indices suddenly sell off, stocks with high relative strength are usually the last to fall&#8211;<em>and<\/em> at a lesser percentage.<\/p>\n\n\n\n<p><strong>By focusing on high relative strength stocks, you automatically maximize your gains, while also reducing risk.<\/strong><\/p>\n\n\n\n<p>Relative strength forms the backbone of our <a href=\"https:\/\/morpheustrading.com\/best-swing-trading-strategy\" target=\"_blank\" rel=\"noreferrer noopener\">swing trading system<\/a> because it works incredibly well <em>and<\/em> is easy to implement.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Two_ways_to_quickly_and_easily_identify_Relative_Strength\"><\/span>Two ways to quickly and easily identify Relative Strength<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Below are two methods for spotting stocks with high relative strength.<\/p>\n\n\n\n<p>Both are equally effective; it&#8217;s just a matter of personal preference.<\/p>\n\n\n\n<p><strong>1. Pattern Relative Strength (visual comparison)<\/strong><\/p>\n\n\n\n<p><em>Pattern relative strength<\/em> is a simple way of visually comparing the price action of any stock vs another (or an index), based on swing highs and lows.<\/p>\n\n\n\n<p>For example, if stock A is setting higher lows while stock B is setting lower lows, then stock A&#8217;s pattern is showing relative strength.<\/p>\n\n\n\n<p>Identifying pattern relative strength only requires manually comparing two chart patterns side by side and looking for bullish divergence (relative strength) between the patterns.<\/p>\n\n\n\n<p><strong>2. Relative Strength line (technical indicator)<\/strong><\/p>\n\n\n\n<p>In addition to visual comparison, a basic technical indicator known as the <em>Relative Strength line<\/em> (&#8220;RS line&#8221;) can be used for spotting relative strength.<\/p>\n\n\n\n<p>The RS line is calculated by taking the closing price of one stock and dividing it by the closing price of another.<\/p>\n\n\n\n<p>The result is then automatically plotted as a simple line on a chart.<\/p>\n\n\n\n<p>In the examples below, the RS line tracks the price of the stock vs. the S&amp;P 500 Index.<\/p>\n\n\n\n<p>With the RS line, we take notice when the line diverges higher, away from the actual stock price.<\/p>\n\n\n\n<p><em><strong>NOTE:<\/strong> Do not confuse the relative strength line with the RSI indicator or IBD&#8217;s RS ranking.<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Two_hot_stocks_with_relative_strength_now\"><\/span>Two hot stocks with relative strength now<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Several stocks in the solar energy sector have caught our attention over the past few weeks.<\/p>\n\n\n\n<p>Daqo New Energy ($DQ) and Jinko Solar ($JKS), both Chinese ADRs, are two of the strongest stocks in the sector now.<\/p>\n\n\n\n<p>Their weekly charts have held up well so far this year, despite most major indexes being down 20-30% or more&#8211;a <em>clear sign of relative strength.<\/em><\/p>\n\n\n\n<p>Below, we show you the relative strength of both stocks using Pattern Relative Strength <em>and<\/em> the RS line.<\/p>\n\n\n\n<p><iframe loading=\"lazy\" width=\"580\" height=\"680\" src=\"https:\/\/4966a6ff.sibforms.com\/serve\/MUIFAOyl4S5Qdajs7q3LemJKudDbMHB24p2SAorKuWWuauy3e1eFPtLgTh5BoPCh3XzIz3rZE_YyIqvc9IEl_xMkRg3MTlG0Zn5eqY3J2eKMjOE-jPuS43ZXewKssUaGt1kllR56wV2u1lBXoYfKSzEgeeTjLyjdSao87VmqsbDtgcy4jNwHMSzf0Rl346rIoBjtZwf-DX0V6tbn\" frameborder=\"0\" scrolling=\"auto\" allowfullscreen style=\"display: block;margin-left: auto;margin-right: auto;max-width: 100%;\"><\/iframe><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Daqo_New_Energy_DQ\"><\/span>Daqo New Energy ($DQ)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><strong>Pattern Relative Strength<\/strong><\/p>\n\n\n\n<p>The first chart below shows how Pattern Relative Strength is determined.<\/p>\n\n\n\n<p>The price of $DQ is on the top panel and the S&amp;P 500 Index is below:<\/p>\n\n\n\n<figure class=\"wp-block-image is-resized\"><a href=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/22DQ.png\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/22DQ.png\" alt=\"$DQ weekly\" width=\"713\" height=\"637\" title=\"\"><\/a><figcaption class=\"wp-element-caption\"><em>Press chart to enable zoom<\/em><\/figcaption><\/figure>\n\n\n\n<p>Above, notice how $DQ chopped around during the first quarter of 2022, while the S&amp;P 500 was setting lower lows.<\/p>\n\n\n\n<p>The bullish divergence really became clear starting in March, as the price set higher highs and higher lows in June versus a plummeting S&amp;P 500.<\/p>\n\n\n\n<p>This is a clear example of Pattern Relative Strength.<\/p>\n\n\n\n<p><strong>Relative Strength Line<\/strong><\/p>\n\n\n\n<p>Next, check out the weekly chart of the same stock using the Relative Strength Line ($DQ vs. the S&amp;P 500):<\/p>\n\n\n\n<figure class=\"wp-block-image is-resized\"><a href=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/22DQ2.png\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/22DQ2.png\" alt=\"$DQ weekly with RS line\" width=\"711\" height=\"616\" title=\"\"><\/a><figcaption class=\"wp-element-caption\"><em>Press chart to enable zoom<\/em><\/figcaption><\/figure>\n\n\n\n<p>Note that the RS line (red line) is already above the prior swing high, while the price is still below.<\/p>\n\n\n\n<p>This is <strong>bullish divergence of the RS line,<\/strong> which is exactly what we look for to find potential market leaders.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Jinko_Solar_JKS\"><\/span>Jinko Solar ($JKS)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><strong>Pattern Relative Strength<\/strong><\/p>\n\n\n\n<p>$JKS has a similar weekly chart pattern as $DQ.<\/p>\n\n\n\n<p>Below notice how $JKS was setting higher highs and lows since April, while the S&amp;P 500 was setting lower highs and lower lows during the same period:<\/p>\n\n\n\n<figure class=\"wp-block-image is-resized\"><a href=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/22JKS.png\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/22JKS.png\" alt=\"$JKS weekly\" width=\"711\" height=\"736\" title=\"\"><\/a><figcaption class=\"wp-element-caption\"><em>Press chart to enable zoom<\/em><\/figcaption><\/figure>\n\n\n\n<p><strong>Relative Strength Line<\/strong><\/p>\n\n\n\n<p>The relative strength line of $JKS confirms the strength, as it has already broken out above range highs and continues to set higher highs while the price is still rangebound:<\/p>\n\n\n\n<figure class=\"wp-block-image is-resized\"><a href=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/22JKS2.png\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/22JKS2.png\" alt=\"$JKS weekly with RS line\" width=\"711\" height=\"662\" title=\"\"><\/a><figcaption class=\"wp-element-caption\"><em>Press chart to enable zoom<\/em><\/figcaption><\/figure>\n\n\n\n<p><strong>The greater the relative strength, the more obvious the pattern should jump at you<\/strong>.<\/p>\n\n\n\n<p>If you are spending too much time analyzing whether or not a particular stock has high relative strength, it probably doesn&#8217;t!<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Maintaining_a_Relative_Strength_Watchlist\"><\/span>Maintaining a Relative Strength Watchlist<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Regardless of market conditions, it is never too early to build a watchlist of stocks showing high relative strength.<\/p>\n\n\n\n<p>By always having an updated Relative Strength Watchlist ready, you can promptly take advantage of profitable trade opportunities when market conditions turn bullish.<\/p>\n\n\n\n<p>Since market conditions can change quickly, astute traders are always prepared for the unexpected.<\/p>\n\n\n\n<p>By the way, our daily <a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\">swing trading report<\/a> now includes full access to our weekly Relative Strength Watchlist&#8211;an <em>awesome free bonus<\/em> for all paid subscribers!<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"WHAT_to_buy%E2%80%93not_WHEN_to_buy\"><\/span>WHAT to buy&#8211;<em>not<\/em> WHEN<em> <\/em>to buy<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>We continually scan for high relative strength stocks to always know the best stocks for swing trading.<\/p>\n\n\n\n<p>However, note that relative strength is <strong>only for finding the right stocks to buy&#8211;<em>not<\/em> for determining when to actually buy.<\/strong><\/p>\n\n\n\n<p>For example, after our Relative Strength Watchlist is in place, the Morpheus <a href=\"https:\/\/morpheustrading.com\/best-swing-trading-strategy\" target=\"_blank\" rel=\"noreferrer noopener\">swing trading strategy<\/a> relies on price, volume, and basic chart patterns to find ideal buy entry points.<\/p>\n\n\n\n<p>Although we look for relative strength on the daily and weekly time frames, note that <strong>relative strength works just as well for shorter time frames<\/strong> (such as daytrading).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Summary\"><\/span>Summary<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A successful trading system is one that can be easily and consistently be followed&#8211;regardless of market conditions.<\/p>\n\n\n\n<p>The simple, &#8220;no nonsense&#8221; technique of relative strength trading is a fantastic way to always find the leading stocks in any market.<\/p>\n\n\n\n<p>Pattern relative strength can be quickly spotted by simply looking for bullish divergence between any stock chart and an index chart.<\/p>\n\n\n\n<p>Alternatively, just plot the relative strength line (<em>not RSI<\/em>) on <a href=\"https:\/\/www.tradingview.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">TradingView<\/a> or your favorite charting platform.<\/p>\n\n\n\n<p>Then, patiently wait for ideal, low-risk entry points to greatly tip the odds of consistent stock trading success in your favor. <\/p>\n\n\n\n<p>Need some help to take your trading to the next level?<\/p>\n\n\n\n<p>Our flagship <strong><em><a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\">Wagner Daily<\/a><\/em> <\/strong>service does the heavy lifting of finding the top relative strength stocks and providing you with our exact entry and stop prices every day.<\/p>\n\n\n\n<p>Plus, <strong>SAVE BIG with our exciting 20-year anniversary promotion<\/strong> happening now!<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\">Get started today<\/a> <\/strong>to receive <em>The Wagner Daily PRO<\/em> service (includes Swing Trader Chatroom) at the cost of <em>The Wagner Daily LITE<\/em>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Relative Strength is the absolute prime technique for consistently picking the best stocks for swing trading in both bull and bear markets. <\/p>\n<p>Here&#8217;s how you can start profiting from it today&#8230;<\/p>\n","protected":false},"author":1,"featured_media":12780,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[],"class_list":["post-12766","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock-trading-strategy"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/12766","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=12766"}],"version-history":[{"count":21,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/12766\/revisions"}],"predecessor-version":[{"id":15732,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/12766\/revisions\/15732"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media\/12780"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=12766"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=12766"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=12766"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}