> For the complete documentation index, see [llms.txt](https://chartschool.stockcharts.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://chartschool.stockcharts.com/table-of-contents/technical-indicators-and-overlays/technical-indicators/price-relative-relative-strength.md). # Price Relative/Relative Strength ## What Is the Price Relative Indicator? Also known as the Relative Strength indicator or Relative Strength Comparative, the Price Relative indicator uses a ratio chart to compare the performance of one security to another.

Chart using three price relative indicators to compare Home Depot to its industry, its sector, and the S&P 500

The Price Relative indicator is often used to do the following: * Gauge a stock's performance against a benchmark index, such as the S\&P 500. * Evaluate a stock's performance relative to its sector or industry group so you can determine if a stock is outperforming or under-performing its peers. * Identify stocks that either hold up well during broad stock market declines or exhibit weakness during market upswings. {% hint style="warning" %} **Note:** At StockCharts.com, a **ratio ticker symbol** is used to create a Price Relative indicator. A ratio symbol consists of two ticker symbols joined together with a colon character (e.g., “IBM:$SPX”, “$INDU:$GOLD”). The value of a ratio ticker symbol is equal to the close of the first symbol divided by the close of the second symbol. {% endhint %} ## How To Calculate the Price Relative Indicator ``` Price Relative = Base Security / Comparative Security Ratio Symbol Close = Close of First Symbol / Close of Second Symbol Ratio Symbol Open = Open of First Symbol / Close of Second Symbol Ratio Symbol High = High of First Symbol / Close of Second Symbol Ratio Symbol Low = Low of First Symbol / Close of Second Symbol ``` The Price Relative indicator is simply the base security divided by the comparative security. Typically, the underlying security is a stock and the benchmark is a major index like the S\&P 500, but the benchmark can be any symbol that makes sense to compare the base security against. For example, chartists can use the Price Relative to show the performance of Starbucks (SBUX) relative to the S\&P 500 ($SPX). This would simply be the price of Starbucks divided by the S\&P 500. Starbucks is part of the consumer discretionary sector. Chartists could also view the performance of Starbucks relative to the Consumer Discretionary SPDR (XLY) with the appropriate [ratio symbol](https://help.stockcharts.com/data-and-ticker-symbols/ticker-symbols#ratio_symbols_relative_strength) (SBUX:XLY). Chartists could also view sector performance relative to the S\&P 500 (XLY:$SPX).

Price Relative Calculation Example using SBUX and $SPX

{% file src="/files/gQhi5G3Avlmr3oXV50gc" %} The table above shows the Starbucks/S\&P 500 Price Relative. The first value in row two is 0.0256 (30.66/1197.75). This ratio increases when Starbucks advances more than the S\&P 500 or declines less than the S\&P 500. This ratio decreases when Starbucks advances less than the S\&P 500 or declines more than the S\&P 500. For reference, the table also shows the percentage change in Starbucks and the S\&P 500. The percentage change in Starbucks less the percentage change in the S\&P 500 is also equal to the daily changes in the Price Relative. In row two, notice that Starbucks was down 2.66% and the S\&P 500 was down 1.62%. The Price Relative moved lower (-1.04%) because Starbucks declined more than the S\&P 500. Row three shows the Price Relative rising because Starbucks (+0.50%) was up more than the S\&P 500 (+.02%). The chart below shows the Price Relative in action.

Price Relative for SBUX and $SPX, as calculated in the spreadsheet example above

## Interpreting the Price Relative The Price Relative indicator is used to gauge relative strength, which is important for stock selection. Many portfolio managers compare their performance to a benchmark, such as the S\&P 500. Their goal is to outperform that benchmark. Managers often look for stocks that show relative strength to achieve this goal. Enter the Price Relative. **The Price Relative rises when a stock shows relative strength and outperforms its benchmark.** Conversely, **the Price Relative falls when a stock shows relative weakness and is underperforming its benchmark.** There are a few ways to use the Price Relative. First, chartists can perform simple trend analysis to determine the direction of the Price Relative. This can be based on the actual trend, support/resistance breaks, moving averages, or other indicators. Second, chartists can look for bullish and bearish divergences in relative strength to warn of a potential reversal in the stock price. ### Identifying Trends in the Price Relative Chartists can apply basic trend analysis or [moving averages](/table-of-contents/technical-indicators-and-overlays/technical-overlays/moving-averages-simple-and-exponential.md) to analyze the change in a security's performance relative to its benchmark over time. As with any price chart, the Price Relative is trending up when higher highs and higher lows form. Conversely, the Price Relative is trending down when lower lows and lower highs form. Chartists can also apply a moving average to the Price Relative. A long-term downtrend in relative strength could be present when the Price Relative is trading below its 150-day SMA. Alternatively, a long-term uptrend could be present when the Price Relative is trading above its 150-day SMA.

The chart above shows Walmart (WMT) with the Price Relative (WMT:$SPX). A 150-day SMA was applied to both the WMT price and the Price Relative. First, notice that the Price Relative broke resistance in late November to signal the start of an uptrend. Out-performance continued into March as the Price Relative traced out higher highs and higher lows. The Price Relative peaked in late March and began forming lower highs. The break below the 150-day SMA in May signaled the start of a downtrend and a period of under-performance for WMT. ### Identifying Bullish/Bearish Divergences A [bullish divergence](/table-of-contents/glossary/glossary-b.md#bullish_divergence) in the Price Relative signals relative strength during a price decline. Stocks that hold up the best during a decline are often the leaders when the market turns around. The chart below shows Dupont (DD) with the Price Relative (DD:$SPX). Even though the stock declined from late April until early July, the Price Relative moved higher to signal relative strength during this decline. Dupont was holding up better than the overall market. The stock subsequently became a leader when the market reversed and started moving higher in July. Notice that the Price Relative and the stock both broke resistance in late July (blue lines).

Bullish Divergence in the Price Relative

A [bearish divergence](/table-of-contents/glossary/glossary-b.md#bearish_divergence) in the Price Relative signals relative weakness during a price advance. Stocks that underperform on the way up often lead lower when the market reverses. The chart below shows Mastercard (MA) with the Price Relative (MA:$SPX). After a sharp decline in early February, the stock advanced to a new reaction high in late April. The Price Relative did not confirm and formed a significantly lower high for a bearish divergence. Also, notice that Price Relative was flat when the stock advanced from the second week of March until late April (blue lines). These signs of relative weakness on the way up foreshadowed a sharp decline in May.

### A Caveat on Price Relative Values Remember that the Price Relative is calculated by dividing the price of one security by the price of another. Therefore, the Price Relative values can vary drastically depending on the prices of the two securities. If the base security has a high price and the benchmark has a lower price, then the Price Relative value will be much higher than if the benchmark is priced above the base security. In the examples above, the focus is on the *direction* of the Price Relative line over time. The actual values for the Price Relative are irrelevant and cannot be compared from one security to the next. {% hint style="success" %} **Cool Tip:** The [Performance Spread indicator](/table-of-contents/technical-indicators-and-overlays/technical-indicators/performance-spread.md) is a similar measure of relative strength, but its values are normalized so that values can be compared between different securities. {% endhint %} ### Using Price Relative for Market Analysis Even though the previous examples focused on using the Price Relative for individual stocks, the Price Relative can also be used for broad market analysis. The stock market can be broken down into eleven sectors represented by the sector SPDRs. Chartists can maintain charts with Price Relatives for these eleven sectors to determine the leaders and the laggards. The market is in offensive mode when the technology and consumer discretionary sectors lead. The market is in defensive mode when consumer staples, healthcare, and utility sectors lead. Once the leading sectors have been determined, chartists can then look within these sectors to find the leading stocks. Sectors that show relative weakness can be avoided to help narrow the search. ## The Bottom Line The Price Relative indicator is a valuable tool for comparing the price of a base security to a benchmark over time, whether the base security is an individual stock or an entire market segment like a sector or industry. When the Price Relative line is rising, the security is outperforming the benchmark, and when the Price Relative line is falling, the security is underperforming the benchmark. Chartists can use trend analysis techniques on the Price Relative line and look for divergences between the base security's price and the Price Relative. As with all indicators, it is important to use the Price Relative in conjunction with other technical analysis tools. [Momentum oscillators](/table-of-contents/technical-indicators-and-overlays/introduction-to-technical-indicators-and-oscillators.md#momentum_oscillators) and [chart patterns](/table-of-contents/chart-analysis/chart-patterns.md) can be used to confirm or refute relative strength or relative weakness. *** ## Charting the Price Relative ### Using with SharpCharts The Price Relative is available in SharpCharts by using the Price indicator with a [ratio ticker symbol](https://help.stockcharts.com/data-and-ticker-symbols/ticker-symbols#ratio_symbols_relative_strength) (e.g., "IBM:$SPX"). First, select the **Price** indicator. Second, in the parameter box, enter the symbol for the base security followed by a colon (":") and then the symbol for the comparative security. Chartists can also use the "$SECTOR" and "$INDUSTRY" pseudo-symbols inside a ratio symbol. We will automatically replace those symbols with the appropriate sector or industry ETF/index. For example, “IBM:$SECTOR” is the same as “IBM:XLK” inside of a SharpChart. The Price Relative can be placed above, below, or behind the price plot of the base security. Placing the indicator “behind price” makes it easy to compare the two lines and spot divergences. The chart below shows the Price Relative (pink) behind the price plot. A moving average or another overlay can also be added to the Price Relative indicator. [Click here for a live version of this chart.](https://stockcharts.com/sc3/ui/?s=XLY\&a=2321186514\&p=D\&yr=0\&mn=6\&dy=0\&id=p20078327003)

### Using with StockChartsACP To add the Price Relative indicator to an ACP chart, add the Price indicator from the Chart Settings panel for your StockChartsACP chart. The indicator can be positioned above or below the security's price plot.

[Click here for a live version of this chart.](https://schrts.co/UUWNgecW) By default, the indicator uses $SPX as the symbol, but the setting can easily be changed to a ratio symbol using the base security and benchmark of your choice, turning the Price indicator into a Price Relative indicator. {% hint style="success" %} **Cool Tip:** To compare the chart's main ticker symbol with its sector or industry, use $SYMBOL for the base security and $SECTOR or $INDUSTRY as the benchmark symbol in the Price Relative indicator (for example, $SYMBOL:$SECTOR). Both the base symbol and the benchmark will be automatically updated as you update the chart's main symbol. {% endhint %} ## Additional Resources ### Recommended Books John Murphy's [*Technical Analysis of the Financial Markets*](https://a.co/d/b8USQ7n) covers relative strength analysis in the chapter on intermarket analysis. Murphy also looks at sector relative strength and shows how to apply relative strength to individual stocks. Martin Pring's [*Technical Analysis Explained*](https://a.co/d/8oDZzxv) features a chapter on the concept of relative strength. Pring shows chart examples to determine relative strength and also teaches readers how to combine relative strength with other indicators. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://chartschool.stockcharts.com/table-of-contents/technical-indicators-and-overlays/technical-indicators/price-relative-relative-strength.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.