Learning about indicators and concepts is the first step towards educating ourselves. However, in order to become skilled at technical analysis, we must learn advanced applications. In our previous article and webinar on Comparative Relative Strength, we learnt about the basic concepts. In this article, we are going to learn how to apply two advanced concepts, i.e Breakout Confirmation and Divergence with Comparative Relative Strength.
Confirming Breakouts with Comparative Relative Strength
A price chart breakout implies that the stock price may begin a new trend in the direction of the breakout. Breakout on the RS chart suggests that the stock may continue to beat the index or peer stocks. Price chart breakouts that are accompanied by RS chart breakouts have a greater likelihood of success owing to a combination of both of these factors.
Scanner Example 1
This scanner scans for stocks which have broken out of a bearish trend-line along with a similar breakout in the Relative Strength with respect to NIFTY. You may choose the Index as per your specific requirement. The scanner is also available in the discover section under ‘Webinar Scanners’ section, named as ‘Comparative RS Breakout’.
Strategy Example – 1
In this section, we will convert the scanner that we made in the previous section into a strategy and backtest the strategy on historical data. To convert it into a strategy, we do not have to create the conditions again as there is an option available on the create scanner page that will convert it into a strategy in one click.
This strategy is also available in the discover section of Strategy. You can search for ‘Comparative RS Breakout’ in the discover section to find the strategy.
Divergence with Comparative Relative Strength
Scanner Example 2
In this example, we are going to learn how to create a scanner to identify stocks forming a bearish divergence. as shown in the image above, a bearish divergence is formed when the price creates a higher high but the indicator creates a lower high.
The conditions:
You can scan these conditions on any timeframe.
Strategy Example – 2
In this section, we will convert the scanner that we saw in the last example into a strategy. To do so, we simply need to click on the ‘Convert into Strategy’ option on the create scanner page.
Conclusion:
Relative Strength Studies help spot the sectors and stocks where the price has the most strength. Additionally, you can also use Comparative Relative Strength to confirm breakouts as well as for spotting divergence. You can extend the concepts discussed in this webinar to other types of divergence and breakouts. One can create various scanners and strategies can to benefit from the Relative Strength Advanced Concepts on Streak.
Disclaimer: The information provided is solely for educational purposes and does not constitute a recommendation to buy, sell, or otherwise deal in investments.
