How To Use Our Data Tools
Here’s a quick run through of the data available in our membership area, and some ideas for how you might use it.
Our data is based upon relative strength. There are many ways to select stocks, and to measure the performance of stocks, but relative strength stands on its own, apart from the crowd. it is the method which time has shown to us to deliver the best performance by far.
I’ll show the reasons why we use relative strength on a separate page, here: The Rationale And Proof Behind Relative Strength
All we need to say here is that relative strength is a way of measuring momentum of a stock. And momentum has been recognized for years by both large hedge funds and academics in the trading industry. A stock showing high momentum has a high probability of continuing in the same direction.
Relative strength ranking takes the whole measurement process a stage further and ranks all the stocks in the trading universe on a scale from 1 to 100.
So, we can look at a single stock, and see instantly, from a single number, exactly where that stock ranks in the whole universe of stocks.
Let’s start with the Sector Relative Strength page. All the following data and tools can be accessed from the Members Content page, which can also be accessed in the menu at the top of the page.
The Sector Relative Strength Page
The Relative Strength page contains a database showing the whole stock market categorized into 31 sectors. This sector classification is widely used within the industry, by well known names such as Morningstar.
By default, the Sector Relative Strength table opens with the sectors sorted in alphabetical order.
We start our journey here because, in order for a stock to have the best chance of moving in the way we are looking for, it is beneficial to have the sector to which the stock belongs also performing well.
It is easy enough to find Sectors ranked by various methods, but this is different. Here, we are using an algorithm based on the relative strength ranking of the component stocks in each sector to rank each of the the 31 sectors. We have found that this works incredibly well.
We can click in the relative strength column on this page to sort the sectors according to their relative strength. We can sort the table ascending, with the lowest value at the top, or descending, with the highest value at the top.
For now, if we we sort descending, this will bring to the top the sector with the highest momentum based performance. Knowing that strong momentum has a high probability of continuing, we are already ahead of the game by selecting stocks which are in this sector.
Now we see that the sectors are sorted by the relative strength ranking number in the first column — 11/1/2019. Typically, you would scroll to the right and work on the most recent date. I am just using the first column as an example easy to see.
So, we have brought to the top the sector with the highest momentum based performance (on Nov 1 2019).
Knowing that strong momentum has a high probability of continuing, we are already ahead of the game by selecting stocks which are in this sector.
But, we can go much further, as we will see in a moment.
First, while still looking at sector performance, let’s go over to the Relative Strength Trendline Chart.
The Relative Strength Trendline Chart
At first glance, this is a lot of information to take in. But note that you can isolate and highlight any of these trendlines simply by hovering your cursor over it.
The animated graphic below shows this happening.
This enables us to quickly see the path and trajectory of any of the sectors in the recent past. Now this is extremely valuable. Instead of just having a static number for the current relative strength performance of a sector we can see whether it is trending up, trending down, where it has been and generally get a much better idea of which sectors we might like to select stocks from for the highest probability of successful trading.
So, in just a few moments, you can see that we can identify the best performing sectors.
At this point, those of you who trade ETFs might simply choose to select an ETF based on one of these high performing sectors. But we can also drill down further, in an equally quick and easy fashion.
The Sector/Industry/Stock Page
Over on the Sector Industry Stock page, we list all the stocks in our database with the relative strength ranking of the stock and also the relative strength ranking of its sector and its industry.
Now we can align the power of relative strength for sector, industry and stock together. Next, we’ll see how this gives us an ideal top-down analysis in just seconds.
As before, the table loads sorted in alphabetical order.
And we use the table in a similar manner to the Relative Strength Sector table, in that we can click on any of the headings to sort the data.
For example, we can click on the RS_Rank column for the Ticker, to bring to the top the highest performing stocks.
But, in addition to seeing the Relative Strength Ranking for the stock, we can now look across and see the Strength Ranking for the stock’s Industry and Sector.
And we can again click on the Sector column to bring to the top the highest performing sector.
And now, we can see the highest performing Sector, and the highest performing Industry within that sector — and the highest performing stocks within that industry and sector.
Now we have the highest performing stocks in the highest performing industry, in the highest performing sector.
I am sure it is instantly apparent to you what this data can do for your trading.
You’re In Good Company
Remember that hedge fund legends such as Cliff Asness and Steve Cohen have been trading the markets for decades, based on relative strength, and continue to do so right now.
Remember, that research revealed in white papers from the academic community has proven — again over decades — that momentum has a high probability of continuation. (More information here: The Rationale And Proof Behind Relative Strength)
So, we have a tacit recommendation from hedge fund legends, coupled with statistical proof from the academic community.
You’re in good company.
This is a very real edge in the market. And it’s not a simple matter for most retail traders to access data like this, and particularly not in this fashion.
Enjoy your membership, make full use of the data provided, and here’s wishing you the very best in your trading.