Trading strategies
Relative strength (RS) line
Definition
A stock’s price divided by a benchmark’s price, plotted as a line. Rising means the stock is outperforming the benchmark; falling means it is lagging.
Example
Say a stock rises from $50 to $55, up 10%, while the benchmark index climbs from 4,000 to 4,200 points, up 5%. The RS line, price divided by index, goes from 0.0125 to about 0.0131, so it rises. It can also rise in a falling market: a stock down 3% while the index drops 8% is still outperforming, even though it lost value.
Hypothetical numbers, for illustration only.
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