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Looking to Outperform? Buy these 3 Stocks Exhibiting "Raw" Relative Strength
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The concept of relative strength is critical for investors to consider in down markets because it helps investors and traders identify resilient assets with the potential to outperform when the market turns around. Two types of relative strength exist – the Relative Strength Index (RSI) and raw relative strength. RSI is a momentum oscillator that measures the speed and change of price movements and helps traders identify overbought and oversold conditions. Raw relative strength is simpler to understand – it considers how stocks performrelative to a benchmark (usually the general market or the corresponding industry group of the stock).
Image Source: Zacks Investment Research
Pictured:In early 2022, ELF Beauty (ELF - Free Report) hit new highs while the S&P hit lows. Sure enough, once the market bounced, ELF became a true market leader
Why is Raw Relative Strength Such a Powerful Indicator?
Relative Strength analysis is an excellent tool for any investor for four reasons: it is quick and easy to identify, it helps to whittle down a large watchlist into a much smaller one, it can be used on any time frame, and most importantly, it works! Studies show that 75% of stocks follow the general market’s direction. The few stocks that resist the market downtrend should be identified by investors because if a down market fails to bring them lower, what will happen when the market turns up? These stocks will rise to the surface like a beach ball being held underwater.
Here are 4 things to look for when identifying relative strength:
· A stock that is green in a blood red market.
· Stocks that are near highs, while most are below them.
· A stock above a moving average while most are below.
· Stocks outperforming their industry.
The fastest and easiest way to search for relative strength candidates is to sort your watch list to stocks gaining ground on a red day for the major indices.
Below are 3 stocks exhibiting standout relative strength that are poised to breakout:
ARRY designs and manufactures ground-mounting systems used in solar energy projects. In recent months, industry peers such as SolarEdge Technologies (SEDG),First Solar (FSLR), and Daqo New Energy (DQ) have broken down.
Image Source: TradingView
Meanwhile, ARRY has held its ground in recent weeks. Shares soared Tuesday after the company inked a long-term agreement with Steel Dynamics (STLD) for steel coils needed for solar projects. The fixed cost and the long duration of the deal should work wonders for ARRY’s already improving profit margins.
Carvana Co. is a leading e-commerce platform for buying and selling used cars. Year-to-date, the company is up nearly 1,000% after successfully restructuring its debt. Debt-to-equity levels are drastically improving, and Monday CVNA saw its debt upgraded by a rating agency.
Image Source: Zacks Investment Research
Carvana’s mounting debt is a key bear argument. However, if debt worries dissipate, the many shorts in the stock will be forced to cover. CVNA is a top set up into year-end. Carvana’s mounting debt was a key bear argument. However, if debt worries dissipate, the many shorts in the stock will be forced to cover. CVNA shares show standout relative strength and are breaking out from an attractive base structure. CVNA is a top set up into year-end.
When markets stumble, pay close attention to which stocks buck the trend. Resilient stocks such as ARRY, CVNA, and COIN are poised to lead once the market regains its footing.
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Looking to Outperform? Buy these 3 Stocks Exhibiting "Raw" Relative Strength
The concept of relative strength is critical for investors to consider in down markets because it helps investors and traders identify resilient assets with the potential to outperform when the market turns around. Two types of relative strength exist – the Relative Strength Index (RSI) and raw relative strength. RSI is a momentum oscillator that measures the speed and change of price movements and helps traders identify overbought and oversold conditions. Raw relative strength is simpler to understand – it considers how stocks performrelative to a benchmark (usually the general market or the corresponding industry group of the stock).
Image Source: Zacks Investment Research
Pictured:In early 2022, ELF Beauty (ELF - Free Report) hit new highs while the S&P hit lows. Sure enough, once the market bounced, ELF became a true market leader
Why is Raw Relative Strength Such a Powerful Indicator?
Relative Strength analysis is an excellent tool for any investor for four reasons: it is quick and easy to identify, it helps to whittle down a large watchlist into a much smaller one, it can be used on any time frame, and most importantly, it works! Studies show that 75% of stocks follow the general market’s direction. The few stocks that resist the market downtrend should be identified by investors because if a down market fails to bring them lower, what will happen when the market turns up? These stocks will rise to the surface like a beach ball being held underwater.
Here are 4 things to look for when identifying relative strength:
· A stock that is green in a blood red market.
· Stocks that are near highs, while most are below them.
· A stock above a moving average while most are below.
· Stocks outperforming their industry.
The fastest and easiest way to search for relative strength candidates is to sort your watch list to stocks gaining ground on a red day for the major indices.
Below are 3 stocks exhibiting standout relative strength that are poised to breakout:
Array Technologies ((ARRY - Free Report) )
ARRY designs and manufactures ground-mounting systems used in solar energy projects. In recent months, industry peers such as SolarEdge Technologies (SEDG), First Solar (FSLR), and Daqo New Energy (DQ) have broken down.
Image Source: TradingView
Meanwhile, ARRY has held its ground in recent weeks. Shares soared Tuesday after the company inked a long-term agreement with Steel Dynamics (STLD) for steel coils needed for solar projects. The fixed cost and the long duration of the deal should work wonders for ARRY’s already improving profit margins.
Image Source: Zacks Investment Research
Carvana ((CVNA - Free Report) )
Carvana Co. is a leading e-commerce platform for buying and selling used cars. Year-to-date, the company is up nearly 1,000% after successfully restructuring its debt. Debt-to-equity levels are drastically improving, and Monday CVNA saw its debt upgraded by a rating agency.
Image Source: Zacks Investment Research
Carvana’s mounting debt is a key bear argument. However, if debt worries dissipate, the many shorts in the stock will be forced to cover. CVNA is a top set up into year-end. Carvana’s mounting debt was a key bear argument. However, if debt worries dissipate, the many shorts in the stock will be forced to cover. CVNA shares show standout relative strength and are breaking out from an attractive base structure. CVNA is a top set up into year-end.
Image Source: TradingView
Coinbase ((COIN - Free Report) )
Coinbase is the leading crypto exchange in the US. Despite recent volatility in the crypto space, Coinbase has been resilient. Earlier, I published an article about the potential for institutional adoption in Bitcoin this year – a significant catalyst for COIN. Look for shares to gain momentum if they can cross the 50-day moving average above.
Image Source: TradingView
Bottom Line
When markets stumble, pay close attention to which stocks buck the trend. Resilient stocks such as ARRY, CVNA, and COIN are poised to lead once the market regains its footing.