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How Relative Strength Rating Helps You Pick Outstanding Growth Stocks

July 04 2020

Whether you are experienced in investing in growth stocks or just learning how to read stock charts, it’s clear that the better information and more tools you have available, the greater your chances of success.

One easy to use but very effective tool is MarketSmith India (MSI)’s Relative Strength (RS) Rating. The RS Rating is typically used along with an RS line. Drawn in every MSI chart in blue, the RS line tracks a stock’s performance versus BSE 500. The RS Rating gauges a stock’s strength compared to the entire universe of listed companies. An RS Rating of 85, for example, indicates that over the past 12 months, a stock has been outperforming 85% of the listed companies. Hence, higher the rating higher is its outperformance.

You can find the RS Rating of stock at MSI Stock Checkup page. This information is particularly good to know just ahead of strong breakouts. Growth stocks with RS Ratings below 80 generally do not show the kind of market outperformance you’d like to see at the point of breakout. There could be better stocks out there to find.

Dixon Technologies:

The stock broke out of its 15-week-long cup-with-handle base on May 29 on above average volume. At the time of breakout, it had an RS Rating of 97, which is a strong technical indicator of bullishness. It was observed in the stock movement, as it hit power-to-pivot.

Related articles: 

To know more about breakout : Breakouts, A Key To Materialize Gains

Pyramiding approach: When To Buy Growth Stocks: How Pyramiding Up Can Be As Easy As A Cup Of Coffee

Read our last week’s learning article : How To Analyze A Stock's Double-Bottom Base


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