Everything Is Relative Strength Is Everything

JC Parets
April 5, 2021

Signals act as indicators for what's to come or what we can expect. If you look closely, there are several signals that can be picked up from the market in order to stay ahead of the curve. A lot of analysis goes into arriving at the bottom of the funnel that is stock selection.

While the bigger trends are in place and their relative analysis helps us understand their strength and weaknesses, there are certain signals that can be picked up on a regular trading day as well.

Take a look at the market move today. Nifty50 opened gap-down and immediately moved lower with a recovery coming through only in the second half of the day. When we look at the gainers and losers among the sectoral indices at the end of the day after the market closes, we get the following picture.

What does this say? This image has ranked the sectoral performances on a down day. We can see that IT and Metals have closed in the green while all other indices have closed in the red. This is relative strength. On a day when the broader market was weak, these two sectors not only managed to hold their ground (net-zero impact) but actually managed to close in the green.

Click on chart to enlarge view.

Similarly, when we look at the indices at the bottom of the table, we see that the weakest sectors were Banks, Realty, and Financial Services.

On a given day when Nifty50 rallies and a couple of sectors close with losses, that would be a relative weakness. Despite a market-wide positive sentiment, there was weakness in those particular sectors.

So while we can overlay one symbol over the other for relative strength analysis and comparative studies, glancing at gainers and losers on high volatility days also generates signals of relative strength.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team

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