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Relative Strength

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Relative strength is a term associated with technical analysis that helps investors understand the momentum of the stock being analyzed. Relative strength measures a particular stock's price change over time and compares that change to the change in a stock market index (i.e. the S&P 500). A stock's relative strength is expressed as a percentage and represents how it performs against other securities. For instance, if a stock has a relative strength of 60, it has outperformed 60 percent of the other stocks over a certain period, typically a year. Some technical analysts prefer stocks with high relative strength because they take it as an indicator of future increases. Other technical analysts view relative strength as an indication that the stock has been overbought and is thus poised to fall. Relative strength is also called price persistence.



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