THE HAnDbook of TECHnICAl AnAlysIsFigure 24.26 shows the equal‐weighted RSP outperforming the capital‐weighted
SPY ETF. Again, RS lines are useful in revealing the effectiveness of funds with
various weighting systems that track the same underlying component stocks.
top‐Down approach using rS analysis
for equity Selection
RS charts may also be used to perform a top‐down search for the strongest per-
forming stocks. This is easily done by first identifying the strongest sectors and in-
dustries using RS analysis. Then a search for the top dozen outperforming stocks is
figure 24.26 RS Charting Revealing the Underperformance of the SPY ETF to Its
Equal‐Weighted Counterpart.
Source: StockCharts.com
figure 24.25 Charts Indicating Overextension in Silver.
Source: StockCharts.com