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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank
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To: Jenna who wrote (13325)8/24/1998 9:08:00 AM
From: Jenna   of 120523
 
A word on Relative Strength: Relative Strength compares a stock's price appreciation against the price progress of the rest of the market. High relative strength stocks ride out corrections with the in these volatile times, the stock might be consolidating and when the Relative Strength picks up again the stock can be a buy.
The 'buy' may only be good for a 1-2 day bounce but for any decisions least dmamge. They are the first to start advancing from a market bottom. The best stocks to own are obviously high earnings stocks and high RS stocks. What happens when the earnings are still okay going forward but the relative strength reaches new lows? If the relative strength goes down below 70 and even below 30 as is the case on adding these stocks to your investment portfolio the market has to undergo a genuine rally.

Most of these rallies lately are 'fakeout' rallies and can suck in potential investors. I would not buy the stock for any short term or intermediate term hold unless the rally is tested through the next 3-4 days. If the rally is genuine, four to seven days into the rally the index should make a one-day gain of 1% or more on an increase in trading volume over the previous trading. With that confirmation signal, you can buy the leaders that break out first and follow through with some on our list.

excerpts from this article courtesy of Investor's Business Daily
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