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Mullooly Asset Management, Inc

Mullooly Asset Management

Fiduciary Fee-Only Financial Planner | Investment Advisor in Wall, NJ

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Tim Mullooly on How We Calculate Relative Strength

How We Calculate Relative Strength

June 1, 2015 by Brendan Mullooly, CFP®

Relative strength is an integral part of our portfolio management strategy at Mullooly Asset Management. To put it plainly, relative strength allows us to compare investments. It’s our way of sizing up stocks, bonds, mutual funds, ETFs, and even asset classes. We can compare these investments to one another or to broad market indices. When something has strong relative strength it signifies outperformance. Relative strength is also referred to as the momentum factor. One way to interpret relative strength is via the point and figure chart. Our friends at Dorsey Wright and Associates have taught us a great deal about point and figure relative strength charts.

How Do We Calculate Relative Strength?

It all revolves around a simple math equation:

Security A’s Closing Price/Security B’s Closing Price X 100 = Relative Strength Reading for Security A

– Take the closing prices of the securities you wish to compare
– Divide them by each other and multiply by 100
– This provides you with Security A’s relative strength reading when compared to Security B

We multiply by 100 to give us an easier number to plot on a point and figure chart.

Tim walks through an example of how we calculate relative strength in this video! Make sure to watch. Be on the lookout for our next video where we plot relative strength readings onto a point and figure chart!

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Filed Under: Videos, Chart School, Technical Analysis Tagged With: point and figure, relative strength

About Brendan Mullooly, CFP®

Brendan Mullooly is a CERTIFIED FINANCIAL PLANNER™professional with Mullooly Asset Management, Inc.

1971 State Route 34, Suite 102
Wall Township, NJ 07719

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The information on this website and blog do not involve the rendering of personalized investment advice. A professional advisor should be consulted before implementing any of the options presented. None of the content contained in this website should be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

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