Comparative Relative Strength charts can be useful in deciding which security to buy, by helping to pinpoint the best performer. They can also be useful in developing spreads, i.e., purchase of thebest performer "long", and selling the weaker issues "short." Comparative Relative Strength can be applied in MetaStock for Windowsas follows:
Creation of a Template for Comparative Relative Strength
(For this illustration, we assume an equity/stock is compared to theS&P 500, both of which must first have been collected from your vendor. Both data files should be in the same periodicity.)
1. Load the S&P 500.
2. Load the equity, or whatever you wish to find the relative strengthfor.
3. Drag the S&P 500 plot into a new inner window of the equity.(You may need to click Stack first.)
4. Close the S&P 500 chart.
5. Create a custom indicator: Div(close, p)
6. Drag the custom indicator into the inner window containing the S&P 500 plot, moving it over the plot until the plot changes to a pink or lavender color, then release your mouse button. (This is calleddragging and dropping an indicator on an indicator. The new indicator willplot in the same window as the S&P 500 plot.) You have two options here:
- You can change the color of the S&P 500 plot to be the same as thechart background color, so that it is effectively invisible. (Double-click the S&P 500 plot to get to its "properties", then choose the coloryou need from the Colors list.)
- You can give both plots different colors so you can tell which is which.
7. Save this chart as a Template. (File|Save As, set "Save File As Type"to Template, and give it a name, such as CMPRELST.MWT.)
Any time you want to see Comparative Relative Strength of an equity against the S&P 500, apply this template to the equity's chart.
Note: if you should move the data file against which you are comparing, such as the S&P 500, this template will no longer work, and would have to be recreated.
To Run an Exploration Using Comparative Relative Strength
1.Load the S&P 500 (or whatever you want to compare against).
2.Create a custom indicator of the Close.
3.Drag and drop this indicator on the S&P 500 (or whatever...).(Note: the S&P 500 plot must change to pink/lavender color before youdrop it.) The indicator will plot.
4.Select the indicator plot (by single-clicking with the left mousebutton on the line).
5.Do an Exploration with DIV(Close,p) in column A, and specify whichdirectory to explore.
6.The results are displayed in the Exploration report.
(P is a special variable that points at the last indicator plotted orselected.)