All Financial Wisdom
The Relative Strength Investing Basics
This is my first post about relative strength that will become nearly a daily thing. It is along the lines of momentum investing with it being a technical investing strategy, or a investing strategy that involves the use of the adjusted closing price.
Why are you using the adjusted close price?
The reason why I am using the adjusted close price as my data points and not anything else, is to include any corporate actions, such as stock splits and dividends. I want to buffer out any rumors and gossip out of the data as much as I can and with eliminating the swings that happen during the day, I am removing myself from it.
How to find the Relative Strength?
I have developed a python program that takes a list of the companies in the S&P 500, and fetches their adjusted close prices for the selected range of dates from Yahoo Finance. Then, my program creates a plot of each one and saves it. My program then measures which are the top 5 and which are the bottom five, and tweets them with some simple analysis.
I am standardizing each stock’s price by taking the first point and calling it an even 100. Then every point after that, I am processing it as:
where Adj.Close(n-1) is the previous adjusted close price, and Adj.Close(n) is the current adjusted close price. I am also using this method on the S&P 500 to compare each stock too.
Today’s Stock Picks
Now for today’s strongest stocks relative to the S&P 500 Index for the past 30 days, is WDC, HCBK, AAP, NVDA and RL. The S&P 500 is at 98.8 points currently.
- WDC, Western Digital Corp. is at 111.1 points.
- HCBK, Hudson City Bancorp, Inc., is at 109.7 points. This is probably due to the approval the merger with M&T Bank Corp.
- AAP, Advanced Auto Parts, Inc., ended the day at 108.7 points.
- NVDA, NVIDA Corporation, is currently at 107.7 points.
- RL, Ralph Lauren Corp, rounds off the top five at 107.6 points.
The underperformers of relative to the S&P 500 Index for the past 30 days, is CNX, WMB, WYNN, THC, and MYL.
- CNX, CONSOL Energy Inc., is at 81.3 points and really shows a steady decline overtime.
- WMB, Williams Companines Inc., ends the day at 82.8 points.
- WYNN, Wynn Resorts, Limited, is currently at 83.1 points.
- THC, Tenet Healthcare Corp, is at 84.7 points.
- MYL, Mylan NV is at 86.3 points.