Using Relative Strength & Weakness With Master Trader Strategies
At Master Trader, we trade compelling setups using our objective approach on anything that moves, and which applies to any time frame.
Master Trader teaches many price patterns for trading stocks and options.
In picking the best setups to trade, there are nuances to the price pattern and behavior of the stock or ETF to know.
Using Relative Strength and Weakness is a powerful concept to increase the odds of trade success.
As you can see, it is one of our Concepts that we consider in our Technical approach for Investing and Trading.
Relative Strength suggests continued out-performance; however, that does not mean we want to own that issue.
The combination of Relative Strength or Weakness with our Checklist ensures that you will only trade the best setups with the best odds of success.
We are going to show you Breakouts we traded on Costco Wholesale Corp. (COST) using bullish stock and option strategies highlighting this Relative Strength concept.
Let’s start with a daily chart of COST and then discuss Relative Strength concepts.
Below is a daily chart of Costco Wholesale Corp. (COST) - VIDEO:
Click on chart to watch video!
All three marked areas are bullish Breakouts.
Dictionary.com defines Relative as “existing or possessing a specified characteristic only in comparison to something else.” In Trading, then, compared to WHAT?
Our approach compares the issue to the broader markets, sector, and market internals.
Now let’s compare Costco’s Relative Strength to the Retail Sector ETF and S&P 500 Index ETF:
The fact that COST was showing Relative Strength made the Breakouts more compelling (i.e., higher probability of follow through).
The analysis is explained in nightly letter videos for subscribers.
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