In the many past posts, I have recommended that to be successful in swing trading, one has to be aware of the individual securities relative strength as it compares to some index of its peers.
The following chart is an example of OIH which is the oil VanEck oil services ETF. I have compared this ETF to SPY, which represents the Standard & Poors 500 index.
The prices are as of the close yesterday, January 12, 2021.
The rules are very simple, and the action indicated by the up and down arrows reflects the result of following the rules.
- Buy when the target security is stronger, on a relative strength basis than the index.
- Buy ONLY when the target is stronger, has positive momentum, and the index is also going up.
- Close the position when any condition is violated. Shown by blue vertical lines.
- The rules apply to shorting when the actions are the opposite of the buy rules.