Lesson 3: Introduction

We have covered how to maintain a point and figure chart and how patterns develop in trend charts. In this chapter we will introduce one of our primary tools when evaluating stocks, Relative Strength. To understand this concept we first needed to understand the basics on how to chart as well as basic patterns.

Our goal as investors is to outperform the averages. If we are simply looking to match performance of the averages then all we have to do is buy SPDRs or Diamonds and sit back. The Relative Strength concept helps us identify the stocks that are likely to outperform the averages as well as those that are likely to underperform.

P&F Craftsman Tip:

A systematic approach to weeding out the weak relative strength stocks from a portfolio, leaving only the strongest, will increase performance.

Lesson 3 Contents:
Part 1: Relative Strength   Part 2: Advanced RS Concepts
  Market Relative Strength
Peer Relative Strength
    Sector Relative Strength
ETF Relative Strength
Mutual Fund Relative Strength
Wrap Up

Test yourself at the end of the chapter to sharpen your skills.