The technical definition of the Relative Strengthen (RS) Index is "A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset."
In practice its a horizontal line on a graph that goes up and down within two fixed bands above and below...when it touches the upper band its time to sell the stock..when it hits the lower band- its time to buy the stock. If you line up this RS line with the price of the stocks it follows an almost almost identical pattern give or take...i.e. historically peak prices does occur when the RS line hits the upper band (at that point the price always falls) and the lowest points in a stocks price occur when RS line hits the bottom band (at that point the price always rises).
Caveat emptor.....
The RS lines for TTA and PTL- the 2 stocks i bought yesterday- both are almost touching the lower band- hence this indicates that the price will increase in the coming days...lets see.
Ill put some screen shots on later to show the RS line- most online stock portfolio management systems will have the option to add the RS line to your stock price graph.
19 Feb 2010
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