This post was published in Dec-2023.
The Relative Strength Matrix (RS Matrix) provides traders and investors with a structured approach to identifying outperforming stocks, leading to data-driven decisions and potentially higher returns.
The Relative Strength Matrix a.k.a. RS Matrix
What Is the RS Matrix?
The Relative Strength (RS) Matrix is a powerful tool in technical analysis that helps traders compare stock performance within a group. Ranking securities by relative strength helps identify market leaders and underperformers, making it easier to spot promising opportunities.
Unlike traditional price charts, the RS Matrix organizes this data into an easy-to-interpret grid. Rows represent individual stocks, while columns display their relative performance against peer securities. This structured visualization allows traders to quickly spot the strongest and weakest performers.
With tools like ChartAlert, investors can automate this process — saving time and ensuring a clear overview of market trends.
Origins of the RS Matrix
The RS Matrix gained prominence thanks to Thomas Dorsey, a respected figure in technical analysis. He refined the concept, transforming relative strength into a structured matrix format that traders could use systematically.
Dorsey’s insights into relative strength-based investing has made this tool a staple among professional traders and institutions, helping them identify high-probability trades with greater precision.
Why the RS Matrix Matters for Traders and Investors
In today’s fast-moving markets, identifying strong stocks before they make big moves is crucial. The RS Matrix provides a data-driven approach that helps investors:
- Spot Market Leaders – Focus on stocks that consistently outperform their peers.
- Avoid Weak Performers – Reduce exposure to underperforming assets that drag down portfolio returns.
- Time Entry & Exit Points – Identify strong stocks early and exit weakening positions before they decline further.
- Enhance Portfolio Performance – Allocate capital to the best-performing stocks for stronger returns.
By leveraging the RS Matrix, traders gain an objective way to rank and filter stocks, increasing the odds of making well-informed investment decisions.
How the RS Matrix Helps in Stock Selection
The RS Matrix isn’t just about ranking stocks—it’s about strategic decision-making. Here are some key applications:
1. Identifying Strong vs. Weak Stocks
The RS Matrix categorizes stocks into:
- Leaders: Stocks showing strong performance relative to their peers.
- Laggards: Underperforming stocks that may signal weakness.
This simple classification enables traders to prioritize winning stocks and steer clear of those losing momentum.
2. Pinpointing Optimal Entry & Exit Points
- When a stock consistently ranks high in the RS Matrix, it suggests strong demand—an ideal buy signal.
- If a stock’s relative strength weakens, it may be time to reduce exposure or exit the position.
3. Improving Risk Management
By consistently tracking relative strength, traders can proactively manage risk by:
- Avoiding stocks that underperform.
- Adjusting portfolios based on shifting market trends.
4. Enhancing Trend Analysis
The RS Matrix visually highlights emerging trends within a sector, helping investors stay aligned with market momentum.
Using ChartAlert for RS Matrix-Based Stock Selection
Manually calculating relative strength can be time-consuming. ChartAlert simplifies the process by automatically generating and ranking stocks using the RS Matrix. With just a few clicks, traders can:
- Instantly visualize market leaders and laggards.
- Streamline stock selection for better trade execution.
- Make data-backed decisions with confidence.
Key Takeaways
The RS Matrix is a game-changer for traders seeking an objective, data-driven approach to stock selection. By identifying outperforming stocks early, investors can enhance their portfolio performance and manage risk more effectively.
Want to see the RS Matrix in action? Sign up for a 4-week paid evaluation trial of ChartAlert today and start making smarter stock selections.
Also see:
1. RS Rating or Relative Strength Rating (an aid for stock selection in ChartAlert)
2. Relative Rotational Charts (an aid for sectoral rotation and stock selection)
3. RS Matrix or Relative Strength Matrix (an aid for sectoral rotation and stock selection)
4. Stock selection using RS Ratio and RS Rating
How to Run the RS Matrix in ChartAlert
The Relative Strength (RS) Matrix in ChartAlert is a powerful tool that helps traders and investors compare stock performance against benchmarks. By running an RS Matrix, you can identify strong and weak stocks or sectors, making more informed trading and investment decisions.
Accessing the RS Matrix in ChartAlert
To open the RS Matrix in ChartAlert, follow these steps:
- Navigate to the Tools menu and select P&F Relative Strength Matrix.
- Alternatively, use the keyboard shortcut CTRL+R for quick access.
- In the RS Matrix dialog, choose the stock groups you want to analyze, such as:
- Market indices
- Sectoral indices
- Index components
- Custom indices or watchlists
- You can run multiple RS Matrices at the same time.
Customizing the RS Matrix Scan
To tailor the RS Matrix to your needs, follow these steps:
- Set the Date or Periodicity: Define the time frame for analysis.
- Adjust P&F Parameters: Customize the Point & Figure (P&F) settings based on your strategy. Some common parameter choices include:
- 3.25% box size for stock RS charts (e.g., INFY/NIFTY, ICICIBANK/NIFTY).
- 3.25% box size for both stock and sectoral RS charts (e.g., NIFTYAUTO/NIFTY, NIFTYIT/NIFTYAUTO).
- 2% box size for sectoral and stock selection analysis.
- Define the Numerator and Denominator:
- In a stock RS chart, the numerator is a stock (e.g., INFY), while the denominator is a benchmark index (e.g., NIFTY).
- In a sectoral RS chart, the numerator is a sector (e.g., NIFTYAUTO), while the denominator is either a benchmark index (e.g., NIFTY) or another sector (e.g., NIFTYIT).
- Customize the Scan Report: Select the specific data points you want displayed in the RS Matrix result.
Saving and Running the RS Matrix
- After setting your parameters, save the RS Matrix scan by assigning a unique name. This makes it easy to rerun the scan later.
- Click Run to execute the RS Matrix and generate results.
- To rerun a saved RS Matrix, select it from the dropdown menu and click Run.
By using the RS Matrix in ChartAlert, you can streamline your stock and sector analysis, identifying outperforming and underperforming assets with ease. Start leveraging this tool today to enhance your trading and investment strategies!
NSE Sector Selection Using the 75th Percentile Strategy
In this analysis, we utilized the Relative Strength (RS) Matrix in ChartAlert to evaluate all 48 NSE indices. By comparing each index against the others, we generated a comprehensive matrix with 2,256 data points (48 indices x 47 indices). This process helps identify the strongest sectors for trading and investing.
Identifying Stronger Sectors with RS Matrix
For example, we analyzed the NIFTYAUTO sector by assessing its relative strength against the other 47 NSE indices using a 2% Point & Figure (P&F) charting method. This generated 47 unique RS charts, such as:
- NIFTYAUTO/NIFTYREALTY
- NIFTYAUTO/NIFTYSML250
- NIFTYAUTO/NIFTYMANUFAC
- … and so on …
- … and so forth …
Key Findings
- Medium-Term Strength: NIFTYAUTO is in a Double Top Buy position against 29 indices.
- Short-Term Strength: It is in an ‘X’ column against 30 indices.
- Underperformance: It holds a Double Top Sell position against 18 indices and is in an ‘O’ column against 17 indices.
Performance Summary
- NIFTYAUTO outperforms 29 indices but is outperformed by 18 indices.
- The short-term ‘X’ column positioning indicates strength against 30 indices, whereas the ‘O’ column suggests weakness against 17 indices.
- Overall, NIFTYAUTO ranks at the 60th percentile among NSE broader and sectoral indices.
However, for optimal sector selection, we focus on indices that rank at or above the 75th percentile.
Focusing on Sectoral Indices for Outperformance
Excluding broader market indices, three sectoral indices emerge as top performers:
- NIFTYREALTY
- NIFTYCPSE
- NIFTYPSE
As of December 15, 2023, these indices have consistently outperformed others. We examined their 2% P&F RS charts using the P&F Patterns Mask to confirm their strength.
The use of 2% P&F noiseless charts enable actionable buy/ sell signals based on P&F pattern detection
NIFTYREALTY/NIFTY RS Chart
- First Buy Signal: Triggered on April 10, 2023.
- Additional Buy Signals: Two more buy signals confirmed ongoing outperformance.
- No Sell Signals: No ‘O’ column has appeared since April 10, 2023.
NIFTYCPSE/NIFTY RS Chart
- Shakeout Phase: June/July 2022.
- Latest Buy Signal: Triggered on February 27, 2023.
- No Sell Signals: No ‘O’ column since the buy signal.
NIFTYPSE/NIFTY RS Chart
- Shakeout Phase: June/July 2022.
- First Sustainable Buy Signal: Triggered on March 8, 2023.
- No Sell Signals: No ‘O’ column since the buy signal.
Given the usual lag in RS signal generation, these sectoral indices were likely moving to the top of the RS Matrix rankings post-April 2023.
Confirming Trends with Price Charts
To further validate these signals, we analyzed the price charts of these three sectoral indices, incorporating:
- 50-bar and 200-bar moving averages
- Price counters to track trends and buy signals
Performance Highlights (As of Dec 15, 2023)
Holding positions in these sectors since the P&F buy signals would have resulted in impressive gains:
- NIFTYREALTY: +80%
- NIFTYCPSE: +60%
- NIFTYPSE: +65%
Despite minor price corrections, no sell signals have emerged, reinforcing the value of the RS P&F method in maintaining positions.
Next Steps: Stock Selection within Strong Sectors
Once the strongest sectors are identified, the next step is to use the RS Matrix at the stock level to find the top-performing stocks within each sector. This ensures that traders and investors capitalize on the best opportunities within leading sectors.
Stock Selection Using Relative Strength Analysis: NIFTYREALTY Index
Selecting the right stocks in the real estate sector requires a data-driven approach. Using the Relative Strength (RS) Matrix, we analyzed the 10 stocks in the NIFTY Realty Index, comparing each against the others. This generated a performance ranking based on relative strength.
Top Stocks in NIFTY Realty Index
Our analysis identified Prestige Estates (PRESTIGE), Brigade Enterprises (BRIGADE), and Sobha Ltd (SOBHA) as the top performers, all ranking at or above the 75th percentile as of December 15, 2023.
Below, we break down the relative strength and price action of these stocks using Point & Figure (P&F) charts and traditional bar charts.
Prestige Estates (PRESTIGE) Performance Analysis
Relative Strength Chart (PRESTIGE/NIFTY)
- The first Double Top Buy signal on the P&F RS chart appeared on April 10, 2023.
- Seven additional buy signals followed, confirming consistent outperformance against NIFTY.
- However, the current ‘O’ column in the RS chart signals a short-term correction.
Price Chart Analysis
- The bar chart shows 50-bar and 200-bar moving averages as trend indicators.
- A price counter validates the buy signal from the RS chart.
- Holding PRESTIGE since April 10, 2023, has yielded a 149% return.
- Despite minor pullbacks, no sell signal has emerged, supporting a long-term bullish stance.
A 50-dMA and 200-dMA of closing prices, and a MA on the volume indicator, have been plotted for reference;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses to date
Brigade Enterprises (BRIGADE) Performance Analysis
Relative Strength Chart (BRIGADE/NIFTY)
- The first buy signal on the P&F RS chart appeared on February 2, 2023.
- Four additional buy signals followed, confirming strength against NIFTY.
- The current ‘O’ column signals a potential short-term pullback.
Price Chart Analysis
- The bar chart, combined with 50-bar and 200-bar moving averages, provides trend confirmation.
- Holding BRIGADE since February 2, 2023, has yielded an 81% return.
- Despite minor corrections, the RS P&F pattern confirms a continued bullish outlook.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses to date
Sobha Ltd (SOBHA) Performance Analysis
Relative Strength Chart (SOBHA/NIFTY)
- The first buy signal on the P&F RS chart appeared on June 2, 2023.
- Three additional buy signals followed, confirming outperformance.
- The ‘O’ column currently suggests a possible short-term pullback.
Price Chart Analysis
- The bar chart confirms the trend using 50-bar and 200-bar moving averages.
- Holding SOBHA since June 2, 2023, has yielded a 79% return.
- The absence of sell signals indicates the RS P&F pattern remains effective in guiding investment decisions.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses to date
Key Takeaways
- Relative Strength Analysis helps identify the strongest stocks within an index.
- PRESTIGE, BRIGADE, and SOBHA have consistently outperformed the NIFTY Realty Index.
- P&F RS Charts provide clear buy signals, while bar charts help confirm trends.
- Despite short-term corrections, no sell signals have emerged, supporting a long-term bullish stance.
Stock Selection Using Relative Strength Analysis: NIFTYCPSE Index
Choosing the right stocks within a strong sector can greatly influence investment outcomes. In this analysis, we apply the Relative Strength (RS) Matrix to assess 11 stocks within the NIFTYCPSE Index, creating a matrix of 110 comparisons. This approach helps us identify the strongest performers.
Based on our analysis, NLC India (NLCINDIA), SJVN, and NBCC emerged as the top three stocks, ranking at or above the 75th percentile as of December 15, 2023. Let’s dive deeper into each stock’s performance using the Point & Figure Relative Strength (P&F RS) charts and bar charts.
NLC India (NLCINDIA) – Strong Uptrend Confirmed
Relative Strength Analysis
- The first P&F Double Top Buy signal for NLCINDIA/NIFTY appeared on May 3, 2023.
- This was followed by four more buy signals, confirming sustained outperformance against NIFTY.
Price Chart Insights
- The bar chart with 50-bar and 200-bar moving averages provides further confirmation of the uptrend.
- Despite minor corrections, the trend remains intact, with no sell signals triggering since the initial buy signal.
- Holding NLCINDIA since the RS buy signal on May 3, 2023, would have yielded a 135% return by December 15, 2023.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses to date
SJVN – A Resilient Performer
Relative Strength Analysis
- The first P&F Double Top Buy signal for SJVN/NIFTY occurred on April 26, 2023.
- A temporary sell signal appeared on October 23, 2023, but a new buy signal emerged shortly after on November 7, 2023.
- Since November 7, there has been no ‘O’ column, indicating continued strength.
Price Chart Insights
- The bar chart with 50-bar and 200-bar moving averages confirms the trend’s strength.
- Despite the October shakeout, following the RS P&F buy signals would have kept us invested.
- Holding SJVN since April 26, 2023, would have resulted in a 110% return by December 15, 2023.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses to date
NBCC – Consistent Market Outperformance
Relative Strength Analysis
- The first P&F Double Top Buy signal for NBCC/NIFTY appeared on April 17, 2023.
- This was followed by six additional buy signals, confirming consistent outperformance.
Price Chart Insights
- The bar chart with 50-bar and 200-bar moving averages supports the strength seen in the RS chart.
- Despite minor corrections, the absence of sell signals reinforces confidence in NBCC’s momentum.
- Holding NBCC since April 17, 2023, would have yielded a 111% return by December 15, 2023.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses to date
Conclusion: Leveraging RS for High-Conviction Trades
This analysis underscores the power of Relative Strength (RS) and Point & Figure (P&F) charting in stock selection. By following RS buy signals, investors could have capitalized on the impressive gains of NLCINDIA, SJVN, and NBCC within the NIFTYCPSE Index.
Despite the shakeout of Oct-2023, following the RS P&F pattern signals would have helped us remain invested in SJVN, as no other sell signal has occurred except for the one in Oct-2023.
How should someone manage shakeouts, like the one observed in SJVN in Oct-2023? We explore some possible ways to handle this situation below.
Stock Selection Using Relative Strength Analysis: NIFTYPSE Index
Identifying Top Stocks in the NIFTYPSE Index
Effective stock selection is key to maximizing returns for both traders and investors. We analyzed 20 stocks in the NIFTYPSE index using the Relative Strength (RS) Matrix. This involved comparing each stock against others, generating a matrix with 380 data points.
The analysis highlighted PFC, RECLTD, BHEL, and HAL as the top-performing stocks, ranking in the 75th percentile or higher as of December 15, 2023. Let’s examine their performance using Point & Figure (P&F) RS charts and price/bar charts to determine key buy signals and investment opportunities.
PFC: A Strong Performer
Relative Strength Analysis
- The 2% P&F RS chart for PFC/NIFTY generated a Double Top Buy signal on November 24, 2022.
- This was followed by five additional buy signals, reinforcing PFC’s outperformance against NIFTY.
Price Chart Analysis
- The 50-bar and 200-bar moving averages confirm an upward trend.
- Holding PFC since the first RS buy signal would have resulted in a 299% return by December 15, 2023.
- Despite minor corrections, no sell signals have been triggered, indicating a strong bullish trend.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses to date
RECLTD: Consistent Gains
Relative Strength Analysis
- The 2% P&F RS chart for RECLTD/NIFTY signaled a Double Top Buy on December 26, 2022.
- Six additional buy signals further confirmed the stock’s relative strength.
Price Chart Analysis
- Applying the 50-bar and 200-bar moving averages aligns with the RS buy signals.
- Holding RECLTD since December 26, 2022, would have yielded a 278% return by December 15, 2023.
- Despite short-term corrections, the RS pattern has remained strong, with no sell signals.
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses to date
BHEL: Resilient Despite Shakeouts
Relative Strength Analysis
- The first P&F RS Double Top Buy appeared on March 17, 2023.
- A Double Bottom Sell signal on October 23, 2023, temporarily disrupted the trend.
- However, a fresh Double Top Buy signal emerged on November 13, 2023.
Price Chart Analysis
- The price/bar chart with 50-bar and 200-bar moving averages confirms the trend alignment with the RS chart.
- Holding BHEL since March 17, 2023, would have returned 91% by December 15, 2023.
- Despite the shakeout in October, the RS P&F pattern provided reliable signals to remain invested.
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses to date
HAL: Steady Outperformance
Relative Strength Analysis
- HAL’s first P&F Double Top Buy signal appeared on January 25, 2022, but was followed by a Double Bottom Sell on February 3, 2023.
- A new buy signal emerged on February 16, 2023, but was invalidated by another sell signal on October 25, 2023.
- A recent buy signal was triggered on November 10, 2023, marking renewed strength.
Price Chart Analysis
- HAL’s price/bar chart with 50-bar and 200-bar moving averages confirms long-term bullish momentum.
- Trading HAL since the January 25, 2022, buy signal would have resulted in a 146% return by December 15, 2023.
- The February 16, 2023, buy signal would have still yielded 74% returns despite temporary shakeouts.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses to date
Key Takeaways
- Relative Strength Analysis effectively identifies outperforming stocks in the NIFTYPSE index.
- PFC, RECLTD, BHEL, and HAL demonstrated strong momentum, with substantial gains over time.
- Point & Figure RS charts help traders remain invested despite short-term corrections, as seen with BHEL and HAL.
- Price/bar charts with moving averages provide additional confirmation for trend validation.
For traders and investors looking to optimize their stock selection process, ChartAlert’s advanced Relative Strength tools can help identify high-probability setups.
In summary, following RS P&F pattern signals, despite shakeouts in Feb- and Oct-2023, would have allowed us to capture the prevailing trend and maintain investments in HAL.
How should someone manage shakeouts, like the ones observed in HAL in Feb-2023 and Oct-2023? We explore some possible ways to handle these situations below.
Applying RS Ratio and RS Rating to NIFTY Realty Stocks
The RS Matrix recently analyzed 10 stocks in the NIFTY Realty index and identified Prestige, Brigade, and Sobha as the top performers, each ranking in the 75th percentile or higher. Now, we will apply the RS Ratio and RS Rating indicators to their price charts to assess how these tools could have improved trading decisions.
Prestige (NIFTY Realty) Price Chart Analysis
- The RS Matrix Trigger signaled a buy for Prestige, identified using the Point and Figure (P&F) Patterns Mask on its 2% P&F Relative Strength (RS) chart against NIFTY.
- The RS Ratio indicator confirmed this buy signal on April 10, 2023, but also highlighted a brief period of underperformance in July and August 2023.
- The RS Rating indicator, however, did not support the April 10 buy signal. It showed that Prestige only entered the top 20% of NIFTY Total stocks in October 2023.
- With Prestige averaging around the 60th-65th percentile, at least 250+ NIFTY Total stocks outperformed it in momentum and potential gains between April and October 2023.
Wouldn’t it make sense to focus on stocks that performed even better than Prestige, despite its NIFTY outperformance?
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses
Brigade (NIFTY Realty) Price Chart Analysis
- Brigade’s RS Matrix Trigger signaled a buy, again identified using the P&F Patterns Mask on its 2% P&F RS chart against NIFTY.
- The RS Ratio indicator confirmed the buy signal on February 2, 2023, but revealed three periods of underperformance: March, July, and October 2023.
- The RS Rating indicator did not align with the buy signal. It showed that Brigade only entered the top 20% of NIFTY Total stocks in December 2023.
- Brigade averaged around the 55th percentile, meaning approximately 350 NIFTY Total stocks outperformed it between February and December 2023.
If better-performing stocks were available, why settle for Brigade?
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses
Sobha (NIFTY Realty) Price Chart Analysis
- Sobha’s RS Matrix Trigger identified a buy signal on June 2, 2023, based on the P&F Patterns Mask applied to its 2% P&F RS chart against NIFTY.
- The RS Ratio indicator validated this buy signal, showing consistent outperformance against NIFTY, aside from a minor dip in July 2023.
- However, the RS Rating indicator did not confirm the June 2 buy signal. Sobha only entered the top 20% of NIFTY Total stocks in November 2023.
- With an average position below the 40th percentile, over 450 NIFTY Total stocks outperformed Sobha between June and October 2023.
If trading is about maximizing returns, why not focus on stocks with even greater momentum than Sobha?
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses
Key Takeaways for Traders and Investors
- RS Ratio and RS Rating indicators provide critical insights beyond basic buy signals.
- Timing matters — a stock outperforming today may not have been the best choice months ago.
- Top-quartile ranking ensures stronger market momentum, making it essential to prioritize stocks consistently outperforming their peers.
Using ChartAlert, traders can effectively analyze RS Ratio and RS Rating trends to identify high-momentum stocks before they make big moves.
Applying RS Ratio and RS Rating to NIFTYCPSE Stocks
Identifying Top-Performing Stocks Using RS Metrics
The RS Matrix previously analyzed 11 stocks in the NIFTYCPSE index and highlighted NLC India (NLCINDIA), SJVN, and NBCC as the top performers, ranking in or above the 75th percentile. Now, let’s apply RS Ratio and RS Rating to their price charts to evaluate how these indicators could have improved trading decisions.
NLC India (NIFTYCPSE) Price Chart Analysis
Trade Signals and Performance
- The RS Matrix trigger identified a buy signal on NLCINDIA’s 2% Point & Figure (P&F) Relative Strength (RS) chart against NIFTY.
- The RS Ratio indicator confirmed the buy signal on May 3, 2023, signaling that NLCINDIA was consistently outperforming NIFTY.
- The RS Rating indicator showed that NLCINDIA entered the top 20% of NIFTYTOTAL stocks in July 2023, four months after the buy signal.
Momentum and Gains
- Apart from a brief underperformance in October 2023, NLCINDIA maintained its position above the 80th percentile, confirming sustained momentum and price appreciation.
- This suggests that RS Ratio and RS Rating could have provided strong validation for trading decisions.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses
SJVN (NIFTYCPSE) Price Chart Analysis
Trade Signals and Performance
- The RS Matrix trigger identified two initial buy signals using the P&F RS chart against NIFTY.
- The RS Ratio indicator confirmed the first buy signal on April 26, 2023, despite a brief underperformance in June 2023.
- When SJVN was sold on October 23, 2023, the RS Ratio indicated it was still outperforming NIFTY, showing resilience against market shakeouts.
Momentum and Gains
- The RS Rating indicator supported the buy signal, with SJVN entering the top 20% of NIFTYTOTAL stocks in July 2023, over two months after the initial buy signal.
- SJVN consistently held its position above the 80th percentile, reinforcing the stock’s bullish momentum and justifying continued gains.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses
NBCC (NIFTYCPSE) Price Chart Analysis
Trade Signals and Performance
- The RS Matrix trigger identified a buy signal on April 17, 2023, using the P&F RS chart.
- The RS Ratio indicator confirmed this buy signal but noted NBCC underperformed NIFTY between June and July 2023.
Momentum and Gains
- Despite the early buy signal, the RS Rating indicator showed NBCC entered the top 20% of NIFTYTOTAL stocks only in September 2023, five months later.
- NBCC averaged around the 60th percentile, indicating that approximately 300 other NIFTYTOTAL stocks outperformed it in momentum and potential gains.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses
Key Takeaways for Traders and Investors
- Early buy signals on RS Matrix can be validated by RS Ratio and RS Rating to confirm sustained outperformance.
- RS Ratio helps navigate market fluctuations, preventing premature exits during temporary underperformance.
- RS Rating ensures focus on stocks consistently ranking in the top percentile for sustained momentum.
- NBCC’s delayed RS Rating entry suggests that traders should prioritize stocks outperforming it, even if NBCC was beating NIFTY.
Using ChartAlert, traders can effectively analyze RS Ratio and RS Rating trends to identify high-momentum stocks before they make big moves.
Applying RS Ratio and RS Rating to Selected NIFTYPSE Stocks
The RS Matrix analysis identified PFC, RECLTD, BHEL, and HAL as the top-performing stocks within the NIFTYPSE index, ranking in the 75th percentile or higher. Now, we apply the RS Ratio and RS Rating indicators to their price charts to assess their effectiveness in improving trading decisions.
PFC Price Chart Analysis
The RS Matrix trigger generated a buy signal based on the P&F Patterns Mask applied to the 2% Point and Figure Relative Strength (P&F RS) chart of PFC/NIFTY.
- The RS Ratio indicator confirmed this buy signal on November 24, 2022. PFC consistently outperformed NIFTY, except for a brief dip in February 2023.
- The RS Rating indicator showed that PFC entered the top 20% of NIFTYTOTAL stocks in December 2022, a month after the initial buy signal. It remained above the 80th percentile, confirming its sustained momentum and price gains.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses
RECLTD Price Chart Analysis
The RS Matrix trigger signaled a buy entry based on the P&F Patterns Mask applied to the 2% P&F RS chart of RECLTD/NIFTY.
- The RS Ratio indicator validated this signal on December 26, 2022, after which RECLTD consistently outperformed NIFTY, except for a minor underperformance in February 2023.
- The RS Rating indicator confirmed that RECLTD decisively entered the top 20% of NIFTYTOTAL stocks in May 2023, five months after the buy signal. Prior to this, the stock hovered around the 80th percentile, indicating an accumulation phase. After May 2023, RECLTD maintained its strong momentum.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses
BHEL Price Chart Analysis
The RS Matrix trigger generated two buy signals based on the P&F Patterns Mask applied to the 2% P&F RS chart of BHEL/NIFTY.
- The RS Ratio indicator supported the first buy signal on March 17, 2023, despite a brief underperformance in April 2023.
- When BHEL was sold on October 23, 2023, the RS Ratio indicator showed continued outperformance against NIFTY, highlighting its role in avoiding unnecessary exits during market shakeouts.
- The RS Rating indicator, however, did not immediately align with the buy stance. BHEL entered the top 20% of NIFTYTOTAL stocks only in August 2023, five months after the buy signal. This suggests that nearly 200 stocks had higher momentum and growth potential than BHEL during that period, making alternative stocks potentially better trading choices.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses
HAL Price Chart Analysis
Among the analyzed NIFTYPSE stocks, HAL/NIFTY faced two significant stop-outs in February 2023 and October 2023, affecting its momentum and potential gains.
- The RS Matrix trigger produced three buy signals based on the P&F Patterns Mask applied to the 2% P&F RS chart of HAL/NIFTY.
- The RS Ratio indicator consistently supported these buy signals since January 25, 2022. However, it failed to prevent losses when HAL was sold in February 2023 and again in October 2023, as the RS Ratio was underperforming NIFTY at those times.
- The RS Rating indicator reflected a bullish stance from October 2022 to August 2023, ranking HAL among the top 20% of NIFTYTOTAL stocks. However, it dipped below the 80th percentile in August 2023, averaging 65th percentile before regaining a top 20% ranking in December 2023.
- When HAL was sold on October 25, 2023, both the RS Ratio and RS Rating indicators showed underperformance, signaling no justification to continue holding the stock.
HAL/NIFTY, among the RS symbols being examined so far, has faced two stop-outs in Feb-2023 and Oct-2023, disrupting momentum and reducing potential gains in stock trading.
50- and 200-dMA of closing prices, MA on the volume indicator, have also been plotted;
The price counter references the buy/ sell RS P&F signals, trigger date and potential gains/losses
Key Takeaways
- The RS Ratio and RS Rating indicators effectively confirmed trading signals and helped assess stock momentum.
- Stocks that maintained RS Rating above the 80th percentile after a buy signal performed best over time.
- BHEL’s delayed RS Rating entry suggests that early buy signals should be cross-verified with momentum indicators.
- HAL’s multiple stop-outs highlight the importance of using both RS Ratio and RS Rating together to avoid unnecessary losses.
By integrating RS Matrix triggers, RS Ratio, and RS Rating indicators, traders and investors can enhance their stock selection and timing strategies for better market performance.
How to Manage Shakeouts in Trading: Case Studies on SJVN and HAL
Shakeouts are common in stock market trading, often leading investors to prematurely exit profitable positions. Understanding how to differentiate between a genuine trend reversal and a temporary shakeout can help traders make informed decisions and stay invested in winning stocks. In this article, we analyze two case studies—SJVN and HAL—to demonstrate how Relative Strength (RS) indicators can aid in managing shakeouts effectively.
Case Study: SJVN Shakeout Analysis
Market Behavior and Initial Sell Signal
On October 23, 2023, a sell signal appeared on the noiseless Point & Figure (P&F) Relative Strength (RS) chart for SJVN/NIFTY, indicating underperformance compared to NIFTY. Additionally, the stock broke below its swing low, which typically signals a bearish trend and a potential exit point.
Why Staying Invested Was the Right Call
Despite the initial decline, the RS Ratio showed that SJVN continued to outperform NIFTY in the medium term. Furthermore, the RS Rating placed SJVN in the top 20% of stocks within the NIFTYTOTAL index. Recognizing this as a shakeout rather than a true breakdown could have prevented premature exit. A trader using the RS Ratio and RS Rating as supplementary indicators would have had strong reasons to stay invested.
The RS Ratio, a medium-term indicator, assesses trends over multiple quarters, and like the exponential moving average, assigns more importance to recent data.
The RS Rating is a longer-term indicator examining trends over one year, and similar in characteristics to the RS Ratio as it assigns more weightage to recent data.
Even the Swing Low was broken, but the RS Ratio and RS Rating could have been used as backup indicators for confirmation.
Case Study: HAL Shakeout Analysis
February 2023 RS Sell Signal
On February 3, 2023, HAL/NIFTY’s P&F RS chart issued a sell signal, suggesting that HAL was lagging behind NIFTY. This was further supported by the RS Ratio, which had been negative since late December 2022. However, the RS Rating still ranked HAL among the top 20% of NIFTYTOTAL stocks, showing its overall strength in the broader market.
Despite the sell signal, HAL did not test its swing low on the price chart. Instead, it gradually recovered and resumed its uptrend. Recognizing this discrepancy between the RS chart and the price action would have helped traders identify the sell signal as a shakeout and remain invested.
October 2023 RS Sell Signal
Another sell signal appeared on October 25, 2023, when HAL/NIFTY’s P&F RS chart again indicated underperformance. The RS Ratio had already turned negative in late September, and the RS Rating had fallen below the 80th percentile by August, removing HAL from the top-performing stocks in the NIFTYTOTAL index.
Although HAL tested its previous swing low, it did not close below it. Instead, the stock rebounded and continued its uptrend. Traders who recognized this as a shakeout on the RS chart—rather than a confirmed bearish breakdown—would have avoided an unnecessary exit and benefited from the stock’s recovery.
Although the RS Ratio and RS Rating indicators were negative, the first Swing Low was not even retested, while the second Swing Low offered support on retest.
Key Takeaways for Managing Shakeouts
- Use Multiple Indicators – Relying solely on one indicator can lead to premature exits. Combining RS Ratio, RS Rating, and price action helps filter out false sell signals.
- Differentiate Between a Shakeout and a Breakdown – A stock dipping below a key level doesn’t always mean a bearish reversal. Consider broader market trends and relative strength metrics before making an exit decision.
- Wait for Confirmation – Selling immediately after an RS sell signal or price drop can be costly. Waiting for a confirmed close below the swing low can help avoid unnecessary exits.
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