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.