saabeer
14-12-2001, Fri 6:31 PM
I would like to talk about how two of these lists can be very helpful in determining a stocks relative strength. When we say a stock has relative strength, we mean that the stock is acting stronger than the market in general, or stronger than the index it is in. An index can also have relative strength compared to the market. For example, on a down day in the market, the Semi Conductor index may be down the same percentage as the market as measured by either the Nasdaq or the SP 500. The charts may also look similar. But the Retail Index may be up on the day, with a chart that shows an intra-day uptrend. This would then be a case of the Retail Index showing great relative strength. Perhaps Wal-Mart is up more than the rest of the Retail Index and is breaking out. It would have good relative strength compared to the Retail Index and great relative strength compared to the SP 500. All the same is true, in reverse, for relative weakness.
First, one of the lists available on ESP shows stocks that are at the top 10 percent and bottom 10 percent of the day's trading range. Picture a market that is in an uptrend on daily charts, but in the middle of a pullback in the middle of the morning. The trend is up, but we are pulling back 50 percent of the day's trading range to an area of support. Looking at stocks that are close to the day's high (Top 10 percent of day's trading range) will give a list of stocks that have a good chance of moving up if the market holds on the pullback and continues up. Playing these stocks on appropriate setups would be playing stocks that are relatively strong. Playing the ones that also have good chart setups would be taking advantage of more than one strategy, and can make for a very good play. The same is true in reverse for finding relative weakness.
Second, check your RealTick page on market indices and look for the strongest index. Look at daily and 15-minute chart patterns, and look at percent gain on a watch list. Find the strong sectors and weak sectors. Then turn to a page that has a list of stocks in that sector. Look at them in a watch list and in 5-minute charts. Look for patterns that defy the current market or sector chart.
Below is an example from Tuesday, Dec. 11th. The market was looking strong all day after the fed announcement, but was suddenly hit hard in the afternoon. Below is a chart of the Nasdaq futures.
http://www.pristine.com/lesson/images/121201_01.gif
This chart defied the market. This is an example of what we call an afternoon jammin' session. The stock was being bought. As the market finally stabilized at the 200-period moving average on the 15-minute chart, as if often does, look what SANM did.
I have shown you two methods of using relative strength to help you in your trading. Relative strength is often strong enough to base some intra-day trades on, but when combined with proper chart setups can be very powerful.
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Notice the afternoon base, when it was taken out, and the 200-period moving average in white. In the Pristine Method Trading Room, we were expecting the afternoon base to hold, but it did not. Scanning the sectors brought the Semi Conductor index to our attention for a while.
http://www.pristine.com/lesson/images/121201_02.gif
Notice how the Semi Conductors held the afternoon base for a long time while the market dropped. Turning to a RealTick page with all of the Semi Conductor components on it revealed many 5-minute charts that looked the same as the market, except one. SANM, as shown
http://www.pristine.com/lesson/images/121201_03.gif
First, one of the lists available on ESP shows stocks that are at the top 10 percent and bottom 10 percent of the day's trading range. Picture a market that is in an uptrend on daily charts, but in the middle of a pullback in the middle of the morning. The trend is up, but we are pulling back 50 percent of the day's trading range to an area of support. Looking at stocks that are close to the day's high (Top 10 percent of day's trading range) will give a list of stocks that have a good chance of moving up if the market holds on the pullback and continues up. Playing these stocks on appropriate setups would be playing stocks that are relatively strong. Playing the ones that also have good chart setups would be taking advantage of more than one strategy, and can make for a very good play. The same is true in reverse for finding relative weakness.
Second, check your RealTick page on market indices and look for the strongest index. Look at daily and 15-minute chart patterns, and look at percent gain on a watch list. Find the strong sectors and weak sectors. Then turn to a page that has a list of stocks in that sector. Look at them in a watch list and in 5-minute charts. Look for patterns that defy the current market or sector chart.
Below is an example from Tuesday, Dec. 11th. The market was looking strong all day after the fed announcement, but was suddenly hit hard in the afternoon. Below is a chart of the Nasdaq futures.
http://www.pristine.com/lesson/images/121201_01.gif
This chart defied the market. This is an example of what we call an afternoon jammin' session. The stock was being bought. As the market finally stabilized at the 200-period moving average on the 15-minute chart, as if often does, look what SANM did.
I have shown you two methods of using relative strength to help you in your trading. Relative strength is often strong enough to base some intra-day trades on, but when combined with proper chart setups can be very powerful.
--------------------------------------------------------------------------------
Notice the afternoon base, when it was taken out, and the 200-period moving average in white. In the Pristine Method Trading Room, we were expecting the afternoon base to hold, but it did not. Scanning the sectors brought the Semi Conductor index to our attention for a while.
http://www.pristine.com/lesson/images/121201_02.gif
Notice how the Semi Conductors held the afternoon base for a long time while the market dropped. Turning to a RealTick page with all of the Semi Conductor components on it revealed many 5-minute charts that looked the same as the market, except one. SANM, as shown
http://www.pristine.com/lesson/images/121201_03.gif