Dear Friends, I have been working on preparing a gift for the traders who like to do Relative Strength Studies, as a part of their trading game plan. . . . Your kind suggestions will help me to make this sheet better, so that it becomes useful for our trading community. A lot of improvements could be made in this sheet, going forward.
I attempted Relative Strength analysis sometime back. The conclusions:
NSE had 11 sectoral indices:
1 CNX Auto Index
2 CNX Bank Index
3 CNX Energy Index
4 CNX Finance Index
5 CNX FMCG Index
6 CNX IT Index
7 CNX Media Index
8 CNX Metal Index
9 CNX Pharma Index
10 CNX PSU Bank Index
11 CNX Realty Index
Every year, as a rule of thumb, one or two sectors will rise much higher than all the rests.And one sector will lag all the rest. In 2013, Nifty was up by 6% but CNX IT by 57%. This is character which a trader can exploit.
[ii] Since there about hundred of companies in the above, it is complicated to track all of them - download their data daily and feed into our excell, and then do the graphs etc.
To keep things short, I selected one dominant company in each sector to track. My list included tata motors, icici bank, ril, idfc, itc, infosys, zee, tata steel, sun pharma, sbi, unitech. These companies, by and large captured the movement in sectoral indices.
[iii] Now the lessons were:
(a) In a real bear market, initially the high RS stocks maintain their lead, but later they fall with greater speed than low RS stock, thus neutralizing the gains of bull market. Some exit decision is needed here.
(b) Best gains from high RS stocks happened during periods when market was flat, yes flat, like in 2012 & 2013.
[iv] I am not savvy with excel as much you are. What is needed is an excel sheet which
(a) automatically pulls in EOD quotes for 15 selected stocks and nifty.
(b) calculates percentage in 20sma at gap of say 30 days for each stock & Nifty.
(c) highlights the two stocks having highest increase and one having lowest increase.
The above is enough to trade RS. I gave up because I did not have time to download data daily from NSE and update the excel.
regards
Rajeev