Ratio charts are one of my favorite things about technical analysis. They allow us to compare how a particular security is performing relative to its benchmark or another security. As trend followers, we expect current market trends to continue until sizeable evidence is introduced that proves otherwise. Ratio or relative strength charts help us identify and confirm these trends. We’re not here to proclaim the market is wrong or place large bets on a potential mean reverting price move (Try it and let me know how it goes). We’d much rather identify well-founded trends in the market and participate in them as best we can. This opens the door for scalable risk management practices and allows us to remain invested in the strongest industries within the strongest sectors of the market. It all starts and ends with relative strength, baby!
The Power of Relative Strength
Awesome write up