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💪 Comparison · Relative Strength

Complete Guide to Relative Strength (RS)
— Finding Strong Stocks Compared to SPY

There are stocks that rise or fall less even when the entire market is declining. The relative strength (RS) compared to SPY plays a key role in finding these hidden strong stocks.

💡 Key Takeaway — It is an indicator for finding stocks stronger than the market. If a stock holds up when the market is falling, it is likely that institutions or strong hands have taken a position, and it will be the leading stock that moves first and strongest during a rebound. (Different concept from RSI)

What is Relative Strength (RS)?

Relative Strength (RS) is an indicator that compares the returns of individual stocks to market indices (such as SPY), showing how much stronger (or weaker) they have moved compared to the market. The key question is one — "Is it performing better than the market?"

Do not confuse with RSI — Although the names are similar, they are completely different. RSI measures the internal momentum of the stock, while relative strength (RS) indicates relative performance compared to the market.

Calculation Method

rs_20d = (20-day return of the stock) − (20-day return of SPY)

For example, if a stock is +8% and SPY is −2%, then rs_20d = +10%p. The market fell, but this stock rose → indicating strong relative strength. Conversely, if the market is +5% and the stock is 0%, then rs_20d = −5%p, indicating weakness as it could not keep up.

Why High RS Stocks are Important

Stocks that hold up or rise even when the market is falling are likely already taken by institutions or strong hands. This means there are fewer sellers and available capital to support the stock. Therefore, when the market turns to a rebound phase, these stocks tend to move first and strongest. RS serves as a filter to identify the leading stocks of the next upward phase.

Utilization in DawnScan

  • rs_20d ≥ +5%p — Relative strength bonus
  • rs_20d ≥ +10%p — Potential for institutional pre-purchases, higher bonus
  • rs_20d ≤ −5%p — Relative weakness penalty
  • rs_20d ≤ −10%p — Clear weakness penalty

However, RS is just one element of the overall score. Even if RS is somewhat low, if squeeze or OBV accumulation is strong, it can still be selected as a final candidate.

Along with Other Signals

RS indicates "strength compared to the market," but entry timing and volatility are complemented by other indicators. Use ADX for trend analysis and RSI for overbought conditions. For a complete combination, refer to pre-breakout early signal overview and methodology.

Warning — Past relative strength does not guarantee future returns. All information is for reference only, and investment responsibility lies with the individual.

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Today's scan to check strong stocks compared to the market along with other signals.

Frequently Asked Questions

Is Relative Strength (RS) different from RSI?

Yes, they are completely different concepts. RSI measures the internal price momentum of the stock (upward speed vs downward speed). In contrast, relative strength (RS) indicates how much better (or worse) an individual stock has performed compared to market indices (such as SPY).

What is the calculation method for RS in DawnScan?

It is calculated as rs_20d = (20-day return of the stock) − (20-day return of SPY). For example, if a stock is +8% and SPY is −2%, then rs_20d = +10%p. If rs_20d is +5%p or higher, it is a bullish signal bonus, and if it is +10%p or higher, it indicates a signal for institutional pre-purchases with a higher bonus.

Why are stocks with high RS important?

Stocks that are relatively strong during market declines are likely already taken by institutions or strong hands. When the market enters a rebound phase, these stocks tend to move first and strongest. RS is a filter for identifying 'the leading stocks of the next upward phase' in advance.

Should I not buy stocks with low RS?

In DawnScan, if rs_20d is below −5%p, it incurs a relative weakness penalty, and if it is below −10%p, it incurs a clear weakness penalty. However, this is just one element reflected in the overall score, and if other indicators (such as Bollinger squeeze or OBV) are strong, they can still be selected as final candidates.
💧
OBV Accumulation Signal
RS Strength + Supply and Demand Accumulation Combined
🧭
ADX Trend Strength
RS Strength + Trend Formation Confirmation
📊
RSI Momentum
Comparison of RS vs RSI Concepts

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