All Financial Wisdom

The Relative Strength Investing Basics

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Relative Strength InvestingThis 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:

IndexAdjCloseEquation

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.

  1. WDC, Western Digital Corp. is at 111.1 points.
  2. HCBK, Hudson City Bancorp, Inc., is at 109.7 points.  This is probably due to the approval the merger with M&T Bank Corp.
  3. AAP, Advanced Auto Parts, Inc., ended the day at 108.7 points.
  4. NVDA, NVIDA Corporation, is currently at 107.7 points.
  5. 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.

  1. CNX, CONSOL Energy Inc., is at 81.3 points and really shows a steady decline overtime.
  2. WMB, Williams Companines Inc., ends the day at 82.8 points.
  3. WYNN, Wynn Resorts, Limited, is currently at 83.1 points.
  4. THC, Tenet Healthcare Corp, is at 84.7 points.
  5. MYL, Mylan NV is at 86.3 points.

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