Go to Jeff Salisbury LWGate Home Page.From: Spencer48@aol.com
Subject: Re: Trailing stops and taking profits (was: RE: [CANSLIM] AAII letter to the ...
Date: Wed, 16 Jul 2003 13:37:55 EDT
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Hong:
I just want to add two comments to Katherine's reply. 1) Comparitive RS
gives a history of how the stock is doing compared to the market. The
strength of the stock as compared to the market can be seen in its graphic RS line.
2) WON puts a lot of value in the comparitive RS line (it is featured on
his DGO graphs). He has said in IBD before that the comparitive RS line can
give you a clue to the strength of a leading stock. For instance, you have 2
leading stocks, one of which you are considering buying, and both are
beginning to consoidate. "A" stock's RS line is consolidating along with the stock;
but "B"'s RS line is rising. Choose to purchase the latter.
jans
In a message dated 7/16/2003 12:41:47 PM Eastern Daylight Time,
kmalm@earthlink.net writes:
<< Your question:
"Isn't the Comparative RS just mimic price/volume action? So it doesn't
give any new info."
Answer:
Absolutely not. First, the comparative RS does not consider volume, just
price. The comparative RS calculation takes the stock's price on any one day
and divides it by the value of the SPX (S&P500 index) on that same day. This
is the reason why the RSLine (comparative RS) does not have a scale. This
ratio is then viewed over time to see how this particular stock is doing
against the market as a whole. For example, you can have a stock rising in
price and still have a declining RSLine. Why? Because the stock is not
rising as quickly as the market. Conversely, you can have a stock falling
in price and still have a rising RSLine. Why? Because the stock may be
falling at a slower rate than the market is falling. This is a very powerful
tool and I place far more importance on it than the RSRank itself, as it is
not muddied by the weird behavior inherent in ranking systems. >>
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