Normalized Relative Strength Line Indicator Overview The "Normalized Relative Strength Line" indicator measures the relative performance of a stock compared to a benchmark index (e.g., NSE ). This indicator helps traders and investors identify whether a stock is outperforming or underperforming the selected benchmark over a specified lookback period. The values are normalized to a range of -100 to +100 for easy interpretation.
Key Features Comparison Symbol: Users can select a benchmark index or any other comparison symbol to measure relative performance. Lookback Period: A user-defined period for normalization, typically set to a number of trading days (e.g., 252 days for one year). Relative Strength Calculation: The indicator calculates the percentage change in price for both the stock and the comparison symbol from the start of the lookback period. Normalization: The relative strength values are normalized to a range of -100 to +100 to facilitate comparison and visualization. Smoothing: An optional 14-period simple moving average (SMA) is applied to the normalized relative strength line for a smoother representation of trends. Interpretation Positive Values (+100 to 0): When the normalized relative strength (RS) line is above 0, it indicates that the stock is outperforming the comparison symbol. Higher values signify stronger outperformance. Negative Values (0 to -100): When the normalized RS line is below 0, it indicates that the stock is underperforming the comparison symbol. Lower values signify stronger underperformance. Horizontal Line at 0: The horizontal line at 0 serves as a reference point. Crossing this line from below indicates a shift from underperformance to outperformance, and crossing from above indicates a shift from outperformance to underperformance. Crossovers: The points where the RS line crosses the moving average (red line) can signal potential changes in relative performance trends. Example Use Case If the normalized RS line of a stock consistently remains around +100, it suggests that the stock has been strongly outperforming the comparison symbol over the selected lookback period. Conversely, if it remains around -100, it suggests strong underperformance.
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