Original subtitles

Hello, everyone. Today is April 1st, and this is session number 13 of the Like

of Trading course.

We have this session and then two more sessions left, and that's it. And we're

going to be done with the whole course.

So one of the things, and I'll talk about this a little bit later, I want

start thinking and sending me some of the questions that you might have for

session number 15.

And that session is going to be on...

any type of questions that you have.

Now, you gotta send me a question with the chart

because we've done this many times in this class and what students usually

do is they say like, okay, for this and this stock, this is the selling climax,

this is this and so on and so forth and we can't see, we can't really see what

you mean.

when you write it, because there could be so many interpretations.

So you have to show me a question on the chart.

So start sending those, and I'm going to start accumulating those. All of the

questions now are going to go into the question bucket, so I'm not going to be

answering those during the classes.

And then this is when we're going to address those.

I've also seen that you guys started registering for the practicum, so that's

great. I'll see you there.

Our first session is going to be on the 22nd, also Monday.

Yeah, and it starts on the 22nd, I think, or the 29th.

I'll have to double -check.

And as usual, everybody's going to be invited to that first session of the

practicum. We're going to do an exercise together.

We're going to give you an assignment.

So if you have any questions about the practicum, let me know, email me, and

we'll just go from there.

Okay, so what are we going to cover today and in the next

session?

So today we're going to, oh, actually we're done with the group exercise.

We're going to talk about comparative and relative analysis.

And this is going to be the case study on Home Depot.

So we're going to go through that. We're going to establish the base of

knowledge on relative and comparative analysis.

A lot of the things, as I mentioned, are going to look somewhat similar to what

you're already doing or maybe you heard about.

There's not a lot of magic to the outperformance or underperformance, but

are some nuances that are extremely important. Plus, we need to connect

everything to...

into the structural analysis as well.

I'm going to have to look at the homework and remind myself, did I do

correctly or not?

Okay, and then the next class, we're going to continue with the comparative

relative analysis. We'll maybe even jump ahead a little bit and talk about the

WICO trading plan.

It's just going to depend.

you know, how quickly we're going to move here.

Okay.

Guys, what was the homework?

I just feel like, you know, I put the lecture material first.

So what was the homework for today?

Were we supposed just to watch the recordings, right?

Yeah. Okay, great.

Okay. Yeah, so now I...

Okay, we're just going to go through the case study first, and then we'll deal

with that.

Okay, so let's talk about relative and comparative strength analysis.

The first chart that I have here for you, this is the chart of Home Depot,

monthly chart, and Spiders, the ETF for S &P 500, also

monthly chart.

And we're seeing the history here from 1995 to about...

And the first thought,

the first concept about the comparative analysis is going to be a Wyckoff

concept where he stated that he wants to compare significant

lows to significant lows and significant highs to significant highs.

and then compare two instruments like a stock and a market

proxy, and say that at some

point at this significant high, this stock is stronger, and at this

low, let's say the market is stronger, and to see that relationship of strength

at those significant highs and lows.

Why is this important?

Well, because if we're thinking about a significant

outperformance, let's say that the market is going down, right? Like

we have had the market going down in 2008, 2009.

And as we are looking at the low in the stock,

and then we're looking at the low in the market, we're seeing that...

the market probably had more underperformance around the low.

And actually on the way down, we see how the price travels down so fast.

We don't see this in the stock that much. There is a very quick recovery

into the close and so on and so forth. So when we see this discrepancy with

which the price moves in the stock and the market, then we start thinking of

the reasons why this discrepancy would be. Why would the stock not move as

much to the downside?

Well, obviously, if it's not moving as much, it means two things.

Either there is less selling and the stock is not being sold as much as

the market, or alternatively, there could be some demand that's coming in.

And that...

absorbs the supply

and

either stops the downtrend

or it just produces the downtrend that is not

that aggressive.

So moves maybe with less aggression.

Moves down less.

Moves down less.

And then when we look at the picture of how the price of the stock moves and we

see that it moves less, there is less selling, we see some elements of the

demand, let's say on those type of bars where the price recovers really quick.

We would be saying that those are all the elements of institutional buying

and we just seen this institutional buying

or institutional accumulation in this case through comparative

strength and we could see that somebody is buying here

somebody of institutional quality and they're probably going to hold on to

stock for some time

If they're buying at this, you know, institutionally.

Not only that, now if we're thinking that institutions

are going to buy and then hold,

this means that supply is not going to be available.

Supply not available.

And if supply is not available, then we are going to be in some kind of uptrend

environment, and we could potentially, if supply is not available, and then

imagine that the news from the company

that is coming out within the next, let's say, couple of years, three years,

within the next business cycle, and we look at how the price moves.

And this is not even done, right? We had a move in Home Depot even after 2014

-15.

So they're going to hold on to this stock for quite some time based on their

business cycle expectations, based on how the news about the revenue for this

company is going to come. So not only is it going to be an uptrend, it also

could be an outperformer.

Again, let me just go through the logic of why in the future it could

outperform.

We've seen how the market moves down very rapidly in 2008.

We don't see the same aggression in the price moving down in Home Depot in 2008.

Instead, we're seeing a downtrend, but we see a lot of recoveries. We see a lot

of attempts to stop the price from moving further down.

This means that somebody is stepping in and starting to buy this low.

And that's what produces this stopping action.

And if the price even moves to the downside, it still has a lot of buying

it. And we see this in the tail here, or multiple tails at this low.

If institutions are buying, they are absorbing the supply, and that supply is

longer available.

in the market because we know how big CEO type of institutions, they

hoarder their supply for the business cycle.

They usually kind of like put this in the vault, put it in the vault and just

away for years and years.

So that means that the supply is not going to be available as with the

improvement of revenue flow.

Other institutions might be inclined to go and buy the stock, and that's going

to produce more of an auction situation where

with the auction, the price will be pushed up. The price will be marked up.

So it's crucial for us to identify the spots where the stock

starts misbehaving.

than the market. It just tells us the story of what's going on at this

particular spot.

Is there buying or is there selling by institutions?

Okay, so that's the whole logic, that's the whole idea.

So what was Wyckoff looking at? He said to measure this,

the outperformance by the stock against the market,

we have to compare

significant highs, synchronize them, and then look at the next significant high.

And look at the slope for the stock and look for the slope for the market.

And see if comparatively the price makes the same

come back to the same high.

And here in this case we're seeing that Home Depot did not come back to the same

high.

The market has, so from significant high number one to significant high number

two,

the stock has not.

It actually created a significant lower high.

So what does it tell us?

It tells us that somewhere here in this area, we're clearly seeing

that as the market goes up and as other stocks are being bought in and marked

up, Home Depot was not, of interest to institutions whatsoever.

If anything, after a certain period of time, they started slowly giving up on

their shares.

So therefore, in this area, we are going to say that the stock was

underperforming the market.

And if the stock is underperforming the market, then there is no interest, at

least currently, from institutions to participate in the stock.

And that means that most likely, whatever the moves are going to be to

upside or to the downside, they're probably going to be not significant and

likely will fail.

And that's the whole idea.

We want to understand if institutions are in the stock, if they

are buyers or sellers.

This should give us a perspective as to the future performance of the stock. And

obviously the idea is just we want to be in the stocks that are going to be

outperforming, significant outperformance.

I call them sometimes super leaders. Those are the stocks that are going to

multiply so many times.

And they're going to be in the...

the supply in that stock is going to be in very, very strong hands.

All right, so we looked at the significant highs.

Now let's look at the significant lows, right? So what would we do? We would

synchronize the lows first.

So I would take this low right here in the market. I would look at what bar on

the stock this low is, and then I would do the same with the next low. So here

is the next.

significant low for the market.

I would look at where the low in the stock is.

And then I would do the stride and try to

compare again and compare the strides. And it's very clear to me that

in the case of significant highs, where we have a lower high for Home Depot,

and we have kind of like a flat high for the market.

This lower high suggests that the stock is weaker at this point.

Please note that even though it's weaker, we don't know exactly

what would be the behavior of institutions at the next low.

We just know that being weaker suggests that we might... see some kind of

outperformance to the downside.

And initially, right here, we were underperforming. When the market was

creating the new highs, look at how Home Depot already was going down.

So I tell my students that outperformance or leadership is causal

as well.

not just the price and the price swings are causal to the creation of the

uptrend.

We also could look at the leadership causality and incorporate that

into the law of cause and effect.

The more causality we see of comparative relative outperformance

in this area, the more we're thinking that

Institutions are extremely aggressive at these lows and they are extremely

aggressive as they are buying.

So therefore we could project that the effect of these initial leadership in

trading range could resolve itself in the significant leadership that would

follow afterwards.

And that's the whole idea.

So let's look at the low here. So significant low, the slope for the

slope for the market. And I would say that still that the market

is weaker here just because of the slope.

The stock is stronger.

And then on the lows, on the highs, we had weaker stock, stronger

market.

And we would go through points like this, and we would

identify in the trading range all of those points of strength and weakness.

And we would try to create the logic behind of how the strength and the

starts to occur.

And then we also will be looking at the relative strength analysis. This is a

modern or relatively modern tool in identification of the performance.

All right, well, let's look at that.

So in this case study, we're going to look at different spots in the trading

range. We had a very, very big uptrend on the monthly chart for Home Depot.

Then we had a significant change of character. And please note that even on

monthly charts, you could see how the change of character produces

the trading range.

relative to the distance of that change of character.

It's a significant change of character. It's not the change of character that we

had here, or let's say here.

It's twice as large, maybe even three or four times as large. So that suggests

that the duration of the trading range is gonna increase.

So anything that we are looking at here is very questionable.

And obviously, what we want to see is we want to see some kind of outperformance

here that would suggest that institutions are getting into this

And as they get in, they absorb the supply, and that would mean, you know, a

good sustainability of the trend.

Yet, it doesn't happen this way.

and we're gonna look into the daily chart right here. Then we're gonna look

this area, and then this area, and this area right here.

And you will see how the leadership characteristics are actually starting to

change.

So let's look first into the range of 2002, 2003.

All right, so,

Let's do this.

Let's have a volunteer, so just say yes.

And now I'll unmute you, and we're going to go through all of these points.

And we'll talk about what is stronger, what is weaker at all of those points,

the market or the stock.

All right, volunteer?

Anyone?

All right, let's do it.

Adam.

How are you doing, Adam?

I'm doing good, Roman. How about yourself?

Yeah, I'm okay.

All right, let's look at point number two.

So let me repeat this first before we go somewhere else. So when we

look at the high, we want to compare that high with the previous

significant high. Where would you think that... Where is that significant

previous high?

For SPY or Home Depot, which one?

Either.

You can probably look at both.

I mean, the previous significant high looks like prior to April there.

Yeah, somewhere here, right?

Yeah. Everything else here is just...

of the same quality of the same magnitude so we would be looking at

like this for the market we would be looking to synchronize this high with

depot and we would be looking at a home depot like this a little bit hard for us

to make a judgment as to um you know this slope because think

also about the scales right sometimes we would not look at the etfs we would

look at maybe like the Dow Industrial, and that index is in the thousands.

So it's going to be hard for us to reconcile the scale. But we'll talk

another tool that we could use.

If we can't really, on the comparative basis,

make a judgment as to...

what is stronger, what is weaker, we could always use a relative strength

line. And a relative strength ratio line is just basically, it's a price

-based tool based on the price of the stock

over the market proxy.

And you could change this. You could have a stock here and you could have a

sector and measure the strength of the stock against the sector.

you could have the stock here and measure it against the strength of the

that the stock belongs to.

And it's always going to give us some kind of line.

And that would be our relative strength ratio line.

And one of the things that we could do here to help us out is as we synchronize

the high, it's actually right here.

Sorry about that.

So it's here. Let me just erase this.

So here it is on the relative strength.

Here it is on Home Depot.

And then we want to take the measurement of relative strength. If it is hard for

us to see that slope, then we could identify

on the relative strength these two spots.

just basically see um did the relative strength deteriorate

or not and we see that it did so we're gonna say that uh this stock

relative to the market at point number two is weaker

and um We could see this also from

the relative strength ratio line, the way how the line unfolds, this blue

The two other lines, the brown and black, those are moving averages.

Why are we using moving averages here? Well, because moving averages are trend

following tools, and basically price divided by price.

is not necessarily creating the price, but it's based on the price. So you're

going to apply the same tools

as we would use, the same trending tools or oscillating tools that we would use

in our price trend analysis.

So therefore, if we would look at this,

line, the blue line, the relative strength ratio line, and we would give

that line a definition of the trend, what would we be saying here? We're

lower highs and lower lows.

And that's a definition of a downtrend.

So we know that the relative strength

So institutions are preferring to have other stocks in their

portfolio more than Home Deeper on the way down.

And that's what it means.

Okay, well, we kind of like took probably, you know, a more difficult

Adam, let's look at number three here. What do you think is stronger at point

number three, the stock or the market?

Well, just for that little gap, it looks like, you know, just based on the

relative strengths, you know, the blue line, Home Depot is showing out

performance there since it's moving up, but Home Depot is still on a downtrend.

So if I were looking at that relative strength chart, I'd probably still stay

away from Home Depot and, you know, own SPY. But the blue line is moving up,

right?

For a very small window of time at point number three, you know, Home Depot is

slightly outperforming relative to SPY, but it's underperforming in the context

and the construct of a downtrend.

So, you know, I would still stay away from it. Okay. So what if we don't look

this? Okay. Okay. On the comparative basis, let's start with the comparative

analysis. Let's start with something that.

required a visual identification of strength, something that Wyckoff himself

back then. Even in his original course, you guys could find two charts, one

under another, and it would be the chart of the stock and the market or the

group or the sector. And that's exactly how he would look at this. He would do

it exactly this way. So at point number three, looking just at two price data

points. for the stock and the market, Adam, what is stronger, what is weaker?

point number three, not before, not after, just at point number three.

And obviously relative to what, right? Because we always would say a

analysis. So this means being compared to something else. So point three, we're

comparing to what?

Well, if you're just comparing.

The lows, right? I mean, they're both at a low exactly at roughly the same time.

But SPY is at a double bottom equal to where it was.

It looks like they're on the first of whatever month that was.

That's point number one.

Yeah, point number one. Yeah, yeah. Whereas Home Depot is obviously lower.

exceeded its previous bottom.

So one relative to the other.

the SPY is going to be stronger.

Here we go. And that's all that we want to see.

That's the whole skill that we're developing right here.

Identifying significant lows for both instruments, synchronizing those,

and just saying we want to see a progress of performance that was made

between these two significant lows.

Gotcha. Okay. And Adam is absolutely correct.

In the case of the market, in the case of the spiders, we have a double bottom.

It's a flat line right here.

And then compared to the stock, we're seeing that the stock is actually making

lower low instead of being flat.

If the stock would behave the same way as the market, the stock price would

somewhere here.

And that would be a comparative parity with the market.

But instead, the stock is creating lower low. Now, why? Why would the stock

create lower low? Well, there is probably a little bit more selling in

than in the market in general at this point of time.

So we would say that the stock is weaker and that the market is stronger at

this point.

And again, as Adam started his analysis, he said, I see that the

stock is weaker, I probably would not be interested going into the stock.

So in other words, if I would translate that statement, it just basically tells

us, I see that the stock is weaker, so therefore institutions are

not extremely interested in the stock, and the timing

is not now for the price to leave.

And the timing of this selection might also not be that great.

So we want to stay away.

And look what happens next.

If we would be thinking about the next rally, the market is outperforming

on the next rally.

It has one move up, second attempt, third attempt.

The stock has one move up.

And then the second attempt creates low or high, and the next attempt creates

low or high again, and then it starts to underperform into five.

So you could see how the identification of weakness here

in this area suggested that there might be some weakness staying forward.

and that this stock is going to be underperforming the market potentially.

So would we want to be in a stock like this on the upside?

No. There are some other stocks that are outperforming the market at point

number three. Those stocks could have lower highs, suggesting that whatever

selling here happened, it was not significant, and the supply has been

the next move is going to be much more favorable.

Well, if we're not sure, again, if we're not sure that at point number three, we

have stock underperforming, look at the relative strength ratio line.

We still would compare it to the low at point number one.

And then we would look at the low at point number three and look at what

here. There is a slope to the downside.

relative strength ratio line deteriorated, suggesting a weakness in

the stock relative to the market.

So we could use a comparative analysis that Wyckoff used back there 100

years ago, or we could use something more modern, like a relative strength

line that I believe was created in the 40s, 50s, and that is a very much

institutional tool.

Institutions create a lot of systems based on relative strength performance.

And they put this relative strength on stocks, on groups, on sectors.

And the money goes and their systems are based in a lot of cases on this

relative outperformance during this specific period of time.

Those institutions are institutional trend followers.

They are trying to systematize their point of entry.

based on the emergence of the trend, and not on the price trend, but also on the

relative trend as well.

All right, Adam, let's finish up all of these points that we have here, all

those numbers. Let's point them before.

What is stronger? What is weaker?

SPY is stronger.

Okay,

and again, really quickly, look at the slope.

and look at the slope of the stock. So we see that the market is stronger,

almost coming back to the highs of point number two.

All right, point number five.

Good question.

So, you know, it looks like if you were to draw a line there, the slopes would

be similar, but you can just use the relative strength ratio and just look at

that from, you know, A to B, and you can see that it looks like, you know, SPY

is still stronger.

Yes, SPY is stronger.

Not by a lot, but it's stronger.

Okay. Well, again, what are the two techniques that we're using here? Visual

technique, comparative analysis.

So from this previous significant low to the current significant low. Oh, yes.

Very good. Yeah, absolutely.

So look at the slope.

Look at the slope. So the market is definitely showing a much more

slope.

I'm actually drawing a line from four to five, sorry.

You're good, you're good.

Your line is much easier to tell.

Okay, all right.

And then the same here, three on the relative strength line and then five on

relative strength line.

And again, the slope is down. So the stock is still underperforming.

Okay, well, let's not forget about this now, Adam. So let's look at point number

six.

Yeah, it still looks like, you know, just looking at from five to six, it

like the SPY line is more shallow than the line from five to six on Home Depot.

Yep. So we're seeing that the stock is still weaker here at six.

If you want a confirmation, again, look at the relative strength ratio line.

and compare these two points and look at the progression of

the price ratio line either up or down and compare

significant low to significant low both on the stock and the market proxy.

Okay, so it's interesting picture where we're seeing that there is a lot of

strength in the market in this area.

And then the stock is just basically weaker, weaker, weaker, weaker, weaker.

So if the stock is weaker, Adam, what do you think institutions are doing here?

Are they in this position? Are they aggressively buying?

Well, just looking since it's a daily chart, I mean, I'm not seeing any

candlesticks that would give me an indication that they're buying.

But think about just the comparative analysis that we've done. In this area

right here, in this box, right? So what does this comparative analysis suggest

the institutions are doing? Are they buyers or sellers?

It would appear they're sellers.

Yeah, they're either not buyers, right? So if they don't buy, what is the stock

going to do? Most likely it's going to kind of drift and then go down.

Yes, and we can.

Because if we don't have the support from institutions and they don't buy,

most likely the stock is going to be in the downtrend. So we kind of see that

the market is much flatter at this point.

There is no interest from big institutions on this stock.

So therefore, let me ask you this question.

Does it mean that this is an accumulation or a distribution?

Great question. Tricky question. Very tricky question.

Well, since we can see, without knowing anything going forward, is that how

you're asking me the question?

But, I mean, just looking at the chart, you could be potentially in both. I

mean, even the inflection that from, I mean, obviously from six to seven, Home

Depot is starting to show strength finally.

So now you're starting to see a shift there. But how would we be thinking

this idea, accumulation or distribution?

At point number six, are we in the accumulation or are we in the

At point six, I mean, at this point, it's...

The stock is being sold off slowly, so it's a distribution phase.

But we should be thinking in terms of accumulation at some point.

I'm just trying to think through it myself, Roman. I'm not really sure.

I mean, I guess – And don't forget, I said this is a tricky question, so the

answer is probably going to be on both sides, like you said.

Yeah, I would –

I would come back and follow your techniques, right? I mean, I would go

point number one. I would be drawing lines.

I would be saying, all right, where's my selling climax?

You know, where's my automatic reaction?

Where's phase B? Where's potentially phase C?

You know, it's point number four.

Yeah. You want to complicate our lives a little bit.

Let's do this.

Climax, automatic reaction, secondary attack.

Test in B, test in B, and here we are potentially in phase C. Is this an

accumulation or a distribution? Point number six.

Okay, so I got to say accumulation.

Okay, so let's just say that this is an accumulation, and we're thinking that

this is an accumulation.

Is this a good accumulation for us to participate in?

No. Why?

It's not very defined.

To me, when I look at this, it doesn't look very defined.

It seems too slow. The progression seems very slow.

I look at phase C and it doesn't look very defined to me. In other words, I

wouldn't have a comfort level. I don't see a shakeout. I don't see a spring.

I'm not really seeing that.

Well,

obviously we know that this was an accumulation.

It probably would be really hard to define that at point number six. Why?

Well, because of the whole weakness that we're seeing in this range.

Because the weaker range is going to suggest that institutions are not

doing anything, not active.

And therefore, if they are not active, then...

they are not accumulating.

Well, how would the price then go up if they are not accumulating?

Well, in some instances, that accumulation will start a little bit

So let's say somewhere here, this is where we're gonna locally see

institutional buying.

And that would suggest, you know, when we, when we would go through all of

points, 6, 7, 8, 9, and 10, or rather 7, 8, 9, and 10,

we're going to see that the market is actually drifting down, and then the

is starting to show some strength here.

So we're seeing strength that basically suggests how would the strength be

showing on the price?

Well, somebody is buying.

and that moves the price up.

And if we're seeing this, we know that the strength is going to be associated

with institutional buying.

So they started buying between, let's say, 6 and 10.

Okay, so listen to this, guys. What I'm going to say next is going to be

important because you could define your visual pattern recognition.

on the relative and comparative strength just based on this concept.

Leadership is causal.

Not just the price. We know this law, law number three, right, that we were

taught about law number three, cause and effect.

What does it say? It says, measure the cause.

and then define the effect by it.

Now think about in terms of this same concept of cause and effect and how

defines the effect, but at the same time think about this cause and effect

relationship on the relative strength.

So what we're seeing here is

The first, the major part of this trading range is actually weaker than

market. So if I would be thinking about the long -term picture, Adam, or long

-term performance, what would be my conclusion as to the

potential long -term performance of this stock after we've seen such a weak

trading range to develop?

Well, it would just seem to me if it's been weak for so long that when you did

start to finally see, you know, Home Depot compared to SPY start to show

outperformance and show strength again, that that's probably, you know, the tide

is probably, the pendulum is going to shift the other way.

And this is probably going to end up being a leadership stock, and they've

either figured something out with their company to get things on the right

track. So anyway, I would be thinking of like a campaign position or a long

-term position. This could happen this way, but we are trying to define the

relationship between causality and the effect.

And we are saying that leadership is causal.

So therefore, if we would take this whole trading range, and we're going to

maybe divide it into two portions.

Let me just do this. Let me redraw this.

So two portions to this trading range.

Long -term picture, weakness.

Short -term picture, outperformance or

strength.

So if this is the cause,

for long term, and this is the cause for short term, then what should

happen next with the leadership?

And this is all causality, right? So if this is the cause, then what should

happen on the effect side of things?

Hopefully prices will go up.

Yes, but I'm asking you what's going to happen with the performance?

So think, Adam, hold on a second. I'm kind of seeing where you are. So just

of like follow my logic here.

We are talking about causality, and we are defining the causality of the

leadership in this trading range. And we're seeing that the long -term picture

or the long -term cause that is being shown to us is weakness.

There is no strength there. And we said that institutions are not actively

buying in this whole trading range.

Now then look at 6 and 10.

That causality is very small, but it shows out performance.

So therefore, if we are saying that

performance is causal,

and the effect is going to be in the equal outperformance or underperformance

what is being shown to us in the trading range, then what should we have on the

next move up? And the price will move up. We see it.

But how is it going to move up?

Is the price going to, is the stock going to start outperforming? And if

going to outperform, is it going to outperform, how is it going to perform

term and how is it going to perform long term?

Think about the cause for the long term. If it's weakness, then the effect is

going to be the same.

So if the long term picture for this trading range suggests that institutions

are not buying, then the long term performance is probably going to be

underperforming.

So the long term effect is going to be underperformance.

I'm tracking with you, yeah.

But then the short term right here in this area, from 6 to 10, we said that

stock is stronger at 7, stronger at 8, stronger at 9, stronger at 10. Suddenly

there is so much strength. Why?

Somebody is coming in and somebody is supporting the stock, and then other

stocks are not really having that type of a performance.

So that suggests short -term buying, which is going to lead to the short

uptrend.

And it's going to also lead to a short -term outperformance.

And that's going to be the short -term effect.

In other words, think about big, big institutions and how they initiate their

opposition, and they would be initiating throughout this whole trading range.

But here, only this supply at this point has been observed very quickly, and

then that suggests short -term outperformance. Do we see a short -term

outperformance here, Adam?

Yes. How do we see that? Well, look at the relative strength.

It's just going up.

It's above the moving averages, and it's creating higher highs

and higher lows.

So what you're saying, Roman, is from like points one to six, that July,

September, October, November, you're saying that's the cause?

And that span of time is what's going to result in long -term underperformance,

potentially, of Home Depot compared to the market.

Is that what you're saying?

Okay.

Law number three. Remember, guys, we kind of touched upon this a little bit,

right? So law number three is going to say when you have a trading range,

your causality.

And if you measure this causality, you could – see that the effect is going to

be equal to the same distance, measured distance, as your course.

Okay. And this is for the price, and we could use the P and F to define this

relationship. Well, I'm saying that this relationship between causality and

effect could be also qualitative, right, in terms of the performance.

So we could say that the...

let's say in the trading range, the relative performance causality

is going to create some kind of outperformance as

an effect.

Okay. I'm tracking with you now. I'm following you. So then we could take

concept a little bit further, and we could say we are seeing that during the

trading range, there was a lot of underperformance.

This underperformance suggests that institutions were not buyers.

So therefore, long -term, we're probably seeing underperformance.

And then short -term, we're seeing that there was some buying, and that suggests

just initial outperformance. And you see it right here in this trend.

So if we were...

thinking about long -term and short -term trade, we probably would be

causality is very small here to outperform.

So it's probably a swing trade instead of a long -term trade.

For the long -term trade, we want to see either institutional accumulation

in the trading range or very aggressive buying.

on the way out.

So either or, and we don't see either, right?

So we don't see institutional accumulation from one to six.

And then whatever accumulation happens here, this is more short -term hands.

So suggest a short -term outperformance. So a swing trade would be better at

that point of time. Does that make sense?

It does.

Okay, well, if it doesn't, Then let's look at the next example really quick,

then it will make a lot of sense.

So now we're looking at 2008, 2009, and think about the same concepts.

I don't want you guys to think about the relative strength as just a filter

that's going to show that the stock is outperforming. I want you to understand

why and what is it exactly that we are looking at when we look at the relative

strength.

We just basically look.

at the relative strength as a function of institutional buying or selling, a

function of institutional preference over other stocks.

And as they prefer this particular stock, then it should be reflected

in the way how the price behaves and how the volume behaves.

Okay, well, let's look at 2008, 2009.

At point number one.

Okay, let's start with point number two. It will be easier. At point number two,

what is stronger, what is weaker?

Home Depot is stronger at point number two.

Okay. Look at this slope, right? Previous significant high.

What does the market do at this high? The market is trying to go up, and it

fails. So the market is weaker. The stock is stronger.

Point number three.

So from two to – well, let's see.

From significant low to significant low.

Yeah, definitely.

I mean, just looking at your – okay, I'm going to cheat.

I'm looking at your low on SPY, and I'm just trying to draw the line there and

the line there.

But Home Depot, it does – I mean, the relative strength chart is actually

up. I can't really tell, Roman, just to be honest with you, without drawing the

lines. But looking at the chart, I want to hear how are you drawing the lines in

your mind.

So number three, what are you comparing point number three to?

From one to three. Okay. Point number one. That's correct. So we're taking one

and three.

We're connecting these two lows.

Here's the low slope.

We are synchronizing the low market.

And we're basically doing the same.

So I would say that maybe visually it's going to be hard here to compare like

this. Again, think about the scales.

Those are different, so therefore you have to be cognizant of that. So what do

we do?

We look at the relative strength line, right? So here is this low, and here is

the low at point number three.

What do we see here, an upslope or a downslope?

We see an upslope, so Home Depot is stronger.

Home Depot is stronger at point number three.

Also, if you are not using relative strength ratio line, you could do a

different trick here.

I would always define the support or the resistance at the previous significant

point for both the stock and the market. And then I would look at the

progression to the downside in this case, right? So the stock has made this

progress to the downside. The market has made this progress.

So would you say, Adam, that... looking at how much deeper, let's say, the

market went down, would that define the weakness for you as well?

It would help, but like you said, the scales may be off a little bit. But

about comparative analysis, right? So we are comparing from one low to another.

So we're thinking below the support, how much deeper?

comparatively the price went down for the market than for the stock yeah it

it was it was it was more for spy than for people and think about you could

think about this also as like number of closes right so for instance the market

is at this low uh when the stock was still somewhere at the higher low at

point relative to point number one right

The market was touching the support when the stock was still at the lower high.

Then as the price started going below the support for the stock, we see two

closes that are below that support, and yet look at how many closes we see here

for the market. So this is a more sustainable move to the downside for the

market. It definitely looks weaker than the stock.

a situation where the stock is stronger at two, stronger at three, what about

four?

So from two to four, and that's another really

tough line to draw there.

And think about maybe like, again, line here at support line at one, what do we

do relative to that line?

Yeah, well, Home Depot is, I mean, better. It's higher.

So it looks stronger to us.

We could compare it to point number two,

which will actually, I think it will be actually lower, right?

Yeah.

Okay.

Yeah, looks like a downslope. Yeah, looks like a downslope. So we would be

thinking, okay, relative strength is showing us that the stock is at point

number four, maybe not recovering as much, but it would be really hard to see

right here. Okay, point number five.

Let's see. So from three to five and then, yeah, so SPY looks pretty flat,

or higher. Yeah, so SPY looks stronger for sure.

Flat. flat yep and then slightly higher low that's five oh also home depot

of course is stronger stronger six yeah yep same thing six look at look at how

four and six in the market low or high higher high so definitely stronger seven

yeah that's yeah it's home people look stronger yeah stronger eight

Same thing, sloping up, and the other one's sloping down, yeah.

Nine.

Yeah, it's sloping down, and that one's pretty, yeah, so Helm Depot's stronger,

yeah. Ten.

Stronger.

SPY still looks pretty flat there, yeah. And then 11.

Yeah, that one.

Hard to see it.

Yeah, really hard to see.

This is the relative strength.

And then 11.

Wow, pretty similar.

Looks like a dead heat. Yeah, looks like a dead heat there. Maybe it's slightly

weaker or something like this.

So now look at the different picture here.

What are we seeing here? Strength.

Strength, strength, strength, strength, strength, strength, strength, strength,

and then some temporary weakness.

What does this comparative strength and relative strength as well? Look at the

uptrend of the relative strength while the stock is actually consolidating.

So what does it tell us, all of this strength?

I don't know what you think.

The causality is showing us that the effect is going to be long -term uptrend

outperformance compared to SPY for Home Depot. So in terms of the performance,

we're seeing that there are so many points of institutional

buying that is being converted into the picture for us of how the price

holds up much better.

the downtrend of the market and during the trading range of the market so this

means that institutions are buyers

therefore this is an accumulation and

they are buying throughout this whole structure so there is a long -term

outperformance

as a function of effect that might come in place.

This means that this is gonna be a preferred theme

for institutions.

Therefore, if this is a preferred theme, they're gonna stay in the trend.

This trend is gonna be sustainable.

on multiple levels, sustainable in terms of the business cycle type of move.

It also could be sustainable in terms of even if short -term, the revenue

expectations become negative, sustainability of the long -term picture

because CO is present in the stock might be very significant. The CO might

support the stock.

on the short -term negative announcements.

And we've seen this so many times.

So CO supports short -term weakness.

What else is here?

It could outperform

on absolute.

relative basis.

So all of those things could happen just because institutions are eager to

get into this position and we see that from the relationship of prices between

the stock and the market proxy.

We've seen their urgency to be in this position long term.

And this is so different than the previous trading range that we've looked

Let's look at that again.

In this area right here, everything was weak.

In this area right here, everything is strong.

So let's see what happens next. I just want you to establish this in your

this whole causality.

So in 2002, 2003, where we said that the long -term picture

was underperforming, suggested

long -term underperformance.

Okay, well, we know what the market has done here, right? And we know what the

stock has done here.

Actually, it probably would be even better to see on a different chart. Let

just go to this chart right here.

So we said in 2002 -2003, long

-term underperformance and short -term outperformance.

Short term, we outperformed here, and then long term, we went into a trading

range, whereas the market was doing what? The market was still going up.

So this is the long term underperformance with the short term,

very quick outperformance.

So therefore, no long term investment trade at this

point, and only...

short -term swing trade.

Now look at 2008, 2009.

This is a different picture.

We looked at this whole trading range and we said this is the trading range

outperforms on so many levels.

Short -term, long -term, everything is there. They want to be in this position.

So this strength is causal and it's going to bring a specific effect.

of outperformance.

And we said that the institutions want to be in this theme and they're not

to provide a lot of supply.

And look at the sustainability of the trend.

Look at the business cycle type of trend lasting for so long.

And look also at the timing.

it's either absorption through the trading range,

absorption through trading range, that

is gonna show us relative strength outperformance, or maybe very aggressive

buying, like for instance in phase D

on the sign of strength where we see urgent demand.

urgent demand and urgent absorption.

You know, in this, two different ways of how institutions can get in into this

position, either slowly throughout this whole trading range or maybe very

quickly, just because there is urgency to be in that stock.

And we didn't see that urgency or

buying throughout the trading range in 2002, 2003, and we saw it very clearly

2008, 2009.

2008, 2009 suggested the timing is now for a much more significant

uptrend. Look at 2002.

There was no long -term indication that this was going to be a big campaign, and

it wasn't.

So therefore, as price.

Relative performance is causal, and we could measure the effect of

that causality.

Let's look at this picture again.

Adam, give me really quickly some kind of label in here of this trading range.

Let's see. So I guess number one would be potentially you're selling.

Climax? I don't know. Maybe it looks like a selling climax.

Look at this three. Look at this climactic run. This is going to be your

point.

Let's start with three as the climactic action.

Four.

AR.

Five.

Secondary test.

There's your phase A.

Test B.

Seven. Eight.

Okay, thrust.

Yeah.

Secondary test.

What about nine?

Nine, I guess that's your third secondary test, so that could be your

phase C at nine.

Second point of fear, look at how the price goes down. Look at how the price

going down into point number three. So the same magnitude reactions, second

point of fear, phase C.

So therefore, everything in between A and C is B.

So therefore, 10 is D.

The phase D.

Major sign of strength.

And then 11.

Backing up your, like you're backing up. Backing up trading range right here.

Just more complex here.

And that's the whole structure. So here is your phase D.

As we are showing a lot of points of outperformance at 2, at 3, at

5, at 4, at 6, at 7, at 8, at 9, and 10, think about how the structure is being

created.

So the stock goes down from 2 to 3.

Institutions are seeing a lot of liquidity.

They love this theme.

They think that this is going to be an outperformer for the future. They are

buying the selling climax.

they are stepping in because there is no fear there that's their system that's

how they accumulate the stock they accumulate the stock based on the value

valuation the future valuation of this company for them is somewhere much much

higher at the end of the business cycle so they would be willing to buy on

liquidity of this climactic um run to the downside

And that's how the price is being stopped because they provide so much

and absorb the supply.

At some point, the sellers are just gone and they're just exhausted and they

stop selling. And that's what gives the price initial push into the automatic

rally. And then push again off the secondary test.

Push again off the secondary test. Push again off the phase C low.

And then suddenly...

All of the supply that was available between, let's say, 23 and 18 has been

observed. And whatever is left is not that significant.

So for the first time, the sellers will not be able to push the price

significantly lower to the support level.

And that's how the backing up action is going to be created.

And that's also a timing tool for us. All of the phase analysis is just

basically a timing tool.

It's a timing tool for us that just...

basically tells us that supply at such levels that we can't even go lower,

expect higher prices, and expect some kind of more or less better move

than what you've seen before.

So both on the relative comparative and price level, we're seeing

such a great example of

institutional presence, institutional buying, institutional accumulation,

institutional expectations of our performance for this stock, and also

together with the market reversal, we are seeing that this could be a

significant secular low, this could be a significant cyclical low, and we want

to participate in this stock.

And usually this type of stock at this point of time is going to be considered

for us as a long -term position.

a campaign position where we want to get in and just accumulate on the way up

more and more and more.

Okay, well, let's see what happens. We are definitely outperforming here on the

way to the upside.

And then we go into two reactions, 2010, 2011, and then 2012, 13,

I believe. So we'll look into this. So let's look at the first one.

And let's go a little bit faster.

Adam, let's look at just the relative strength.

What do you see into the top of the price action? And this is the

price action that came after the trading range that we just looked at. So there

is a lot of outperformance on the way up.

We see that in the relative strength.

And then what happens next?

It just falls apart.

I mean, it breaks down.

And what does this suggest on the institutional side?

There's institutional selling taking place.

Yeah, something is going on specifically here.

We're seeing how both the price goes below the previous lows and

the relative strength line also just suggests such a drop in the leadership,

in the short -term leadership.

Well, please bear in mind that this is short -term, right? So this is not long

-term yet.

So this underperformance is very short term. We need to see if there's gonna be

some kind of buy after that.

But look also at the market.

This was a flash crash on May 6th.

And then the market is flat.

The stock is actually going down. So there is weakness here.

And this weakness,

Even though it's a short term, it just basically suggests a pause.

Because if we think about the long -term picture on the leadership,

we said that we're going to see a long -term outperformance.

But during this long -term outperformance, it's still going to look

as if the price moves in the uptrend. It's going to have a move up.

it's going to have a short -term weakness short -term deterioration a

short -term weakness short -term deterioration move up and then it's

have a much more substantial deterioration that would suggest a more

pause in the long -term uptrend of the performance

so therefore when we see the spots we need to figure out

how institutions are coming in into this position.

Are they aggressive?

Are they not aggressive? If they're coming in right now, does it mean that

big move is going to happen now, right afterwards?

So Adam, looking at what happens next in this formation right here, what could

we say?

coming back in and holding the price at, what, 28 there, but it doesn't look

like they're coming in big. I mean, you don't see a huge move up.

So something like this, right, on the relative strength on the comparative

analysis, we could see how the price of the stock moves and then how the price

of the market moves.

We could see that the stock is short -term more aggressive.

So more buying.

And this more buying short term suggests short term outperformance.

And where is that short term outperformance?

Well, in two places.

We see a short term outperformance here and then we see a short term

outperformance right here.

So it reminds me a little bit of what we have seen in 2002, 2003.

The long term picture was

somewhat weaker, and suggested that institutions are not seeing this

current reaction as the reaction from which the price is going to

go up.

I mean, it still goes up, you know, by 50 % or so.

But then it fails and it goes into the consolidation. It actually comes back

to this level and retests this low.

So think about this.

If we would be seeing short -term outperformance, and we would

be mistaking this for a long -term outperformance, we

could come in into this position, and then when the price comes back into this

area, that would be a big question for us.

Because the price is already at this level, there is a lot of inefficiency of

RAS going to 39 and then dropping and then holding on to the stock.

So the timing is important here. And sometimes the timing

is going to be defined by us by looking at how institutions behave.

And from the relative strength and comparative strength analysis, we don't

that they are extremely aggressive here at this spot.

Okay, well, how about the next reaction? So we're looking, we looked at this

reaction right here. How about this reaction, the next one?

Would that define the timing like we've seen the timing here in 2002,

2003? It said, no, not yet.

Then we've seen the timing here 2008, 2009.

And it said, yes.

Next reaction right here, not yet.

Let's see if here we're going to see the timing for us to come in into this

position.

Okay. Well, Adam, it's all yours. So at point number, let's say at point number

one, are we stronger or weaker for the stock?

We are stronger.

Okay. So what do we do? We're comparing it like this, defining the low.

Okay, let's see, this and this.

Okay,

so I'm going to talk about this indiscrepancy, and there was a question

think it was from Nilesh.

Are there any discrepancies between, let's say, the relative strength line

the comparative analysis?

There could be one.

The thing is, when we are comparing the low to the low, We cannot take

the data point of the close, and this is what it is. This is the relative

strength line based on the close.

What we should do when we compare the low to the low is to compare the

actual data for the low to the actual data of the low as well.

So, for instance, the close here is at this level on this bar.

but the low of that bar is here.

So you could see how different the measurement could be.

And I want to make this note for you because this is gonna be important for

those of you who's gonna actually codify this.

And we've had a student, Howard, who actually not just codified this, but he

created an indicator that was available on TradeStation and you still can go to

our website and under the tools you could find his work.

And actually today I'm going to show you some other things that he did for us.

Okay, well let's say that maybe at one we are somewhat weaker than the market.

Okay, then what about two?

So previous high to two.

I mean, that's definitely less steep, so Home Depot definitely looks stronger.

Three. Yeah.

Same thing. Home Depot is stronger.

Four.

Home Depot is stronger.

Five.

Stronger. Six.

Yeah, I don't know. Let's see.

Home Depot looks stronger. Okay, well, let's use relative strength.

Yeah, it's hard to tell on that one.

Okay. Yeah, just barely.

Barely. Yeah, but stronger.

Okay. Seven. Stronger. Yeah.

Seven to nine. Yeah, so going to be stronger. Or five to seven. Excuse me.

Let's see. Five.

Yeah, you have to draw that one out, too. It's hard to tell.

Again, this is really tough.

Yeah. Okay.

Well, let's just say equal. Okay. Eight.

Let's see. Six to eight. Definitely stronger because that one's so down.

Oh, definitely stronger.

Yeah. Market's actually sloping down. Yeah. And we look at the relative

line and from this low to nine,

I mean, like, what do you guys see?

It's a no -brainer. Yeah. Yeah. It's an uptrend. So the stock is outperforming

in this area everything that the market throws at the stock.

And there's just a sustainable short -term uptrend of the relative strength

and sustainable.

uptrend already of the price.

We just have not overcome the long -term resistance.

So the biggest question in this area, looking at all of the elements of

strength, what does it mean for us in terms of how we look at

institutional participation?

Are they present?

And if they are, are they buyers or sellers?

What do you think, Adam?

They are definitely buyers here. They're definitely buyers.

And then the next question, are they aggressive buyers or just maybe like

type of buying activity?

I think they're – I mean, 2011 was one of the most complicated years for the

market because of all the issues with 2011. But they're buying here. I mean,

market was in duress between July and the rest of the year, and Home Depot is

going up. I mean, they're buying here.

I would say fairly aggressively.

Fairly aggressively.

Why? Because look at the sequence of these trends.

It suggests that they are buying on the rally and they're not selling on the

reaction. Buying on the rally, again, to outperform not selling on the reaction.

Buying more on the rally, not selling on the reaction. Buying more on the rally,

not selling on the reaction.

This is very aggressive because it's consistent.

It's a consistent buying.

Probably also on the way down, in this zone, this looks like a value zone, so

they are aggressive buyers.

If they are aggressive buyers, so institutions are

aggressive buyers, what does it mean for the

supply?

Supply?

Go ahead.

Yeah, I'm just saying it's being absorbed.

I mean, supply is moving into institutional hands, and prices are

ultimately keep going up pretty nicely.

Yeah, if supply is absorbed. Remember, guys, that story about the ice cream?

The more we sell, the more supply goes away from us, and the more that supply

lands into the hands of the CO, of the composite man. Now, the composite man is

not interested in selling this supply in a month.

or two or even a year if the prospect is really good they're going to hold on to

that supply not present it to the markets and then as the price starts to

perform better that's going to attract other institutions those are

institutional trend followers and they're going to say well this stock

so well let me get more stocks but there is not a lot of availability of the

supply at this point of time so they will have to auction for to get the

of the stock and they're going to go into the auction scenarios where they

buy the stock at the higher price like it's shown here this is all buying

on the way up it's more subtle because the volume signature is going to be less

majority of the institutions would prefer to getting on the liquidity, but

defines a lot of the institutional presence, their buying, and their

and aggressive buying, which, by the way, Adam, should lead to what kind of

-term effect?

Would the stock outperform long -term?

Yes, absolutely.

Yeah, so long -term outperformance, that's what we should be expecting.

So with this long -term outperformance, we would be thinking investing, long

-term position. We could still do a swing.

We could do a swing trade because the short -term also defines outperformance,

so we should be in the swing as well.

And look at the relative strength trend.

This is probably one of the most persistent relative strength trends that

seen.

It just goes up and up and up. It doesn't go into extreme overbought or

oversold. It's just very sustainable. The reactions are really small.

All right, Adam, thank you.

Yes, you bet. Glad to help.

All right, so let's look at the next trading range here in 2013 and 2014. And

the way, yeah, this is the reaction that we were looking at.

And we said...

We've seen the same elements as we've seen on the reaction 2008 -2009. So 2008

-2009 defines more of the long -term.

2011 -12 defines more of the timing for the short -term cyclical low.

Look what happens next.

They wanted to be in this position. Why? Well, because it's so valuable to them.

They see a lot of future valuation in higher prices.

They want to be in that position before.

And look at the run from 30 to 80.

More than doubled on that run and overcame a long -term resistance.

And, you know, the price requires, or rather the

stock requires such behavior by institutions where they've

seen... aggressive buying and that would suggest that if we're going to have the

rally, we might actually overcome the high here.

So there are a lot of concepts that are tied together here where we look at the

relative comparative performance and we could deduct the way the character with

which the price is going to move. We could deduct the timing of when the

might leave the trading range and we also could

speculate as to the short -term and long -term performance.

All right, let's look at 2013, 2014 range.

And here is the next question.

We look at the price of the stock on the daily, and we look at the

relative strength ratio line.

And this is also based on the daily.

We see that the price just basically consolidates. It's a trading range.

But then the relative strength is actually going down.

So the question that I have for you guys, and I want you to answer this,

it down in your answers, in your questions box, why the relative

strength line is trending down?

What's happening here?

Okay, some answers are coming in. The market is moving higher at a faster pace

than Home Depot.

Difference between the slopes of the trading ranges.

Okay, which is basically the same.

Slope for the stock, slope for the market.

Underperforming the market on the up move.

Yes, all of you guys are correct.

Look at this higher highs, higher lows, and even though...

Home Depot has the same type of structure, higher highs, higher lows,

Home Depot is predominantly in the trading range.

The market is going up

in a more sustainable uptrend

than the stock.

The stock is just consolidating mostly.

The market is trending up.

So if the market is in the uptrend and the stock is in the trading range, then

what is stronger, what is weaker?

Obviously, the market is stronger.

Therefore, the stock is weaker.

And on the relative trend, it's going to be shown as lower highs, lower

lows, despite of the prices being in the consolidation for the stock.

It's not about the structure of the price that would define for us the

relative strength of the stock.

It's the structure of the price relative to the stock relative to the price

structure of the market proxy, in this case, spiders.

So when we look at the market and the market is uptrending, and the stock is

just consolidating, then the stock is weaker, behaving weaker.

The price of the stock is behaving weaker than the price of the market.

And therefore, relative strength is going to be in the downtrend. But

significant happens later on.

We've talked about two ways of how institutions can accumulate. They could

accumulate through the trading range.

or they could accumulate aggressively on the way out of the trading range.

And we're seeing that there is some kind of aggression with which the price

moves up out of the consolidation, and how the relative strength breaks the

trend and creates a major sign of strength on both.

And in a lot of cases, this is going to be a characteristic of phase D.

We might have a reaccumulation where the price just spends a lot of time.

Institutions are kind of, you know, not interested at this point.

And that leads to some kind of short -term capitulations within this

where weak hands are giving up their positions. And then suddenly when supply

so low, that's when the price starts to move up.

institutional trend followers are starting to get in into this position.

And that defines the move of the price, and that also defines the move of the

relative strength line.

Such aggressive buying, pushing the price higher, suggests

urgent accumulation, suggests that they want to be in this position, suggests

that we are going to have an uptrend.

The timing is now, and this is a potential stock that's going to

And that's exactly how it happened.

All right.

A homework.

A homework is going to be four flights.

On each slide, you're going to have a market proxy, S &P 500.

And I'm going to show you this S &P 500 at an important swing top

or bottom, meaning that if this is the top, then the next move is going to be

the downside.

If this is the bottom, then the next move is going to be to the upside.

So I'm effectively giving you a bias definition for the next swing.

Your task is to look at the stock or stocks and choose

at the market top the stocks that are in the distributional or redistributional

structure, that are in phases C, D, O, E, and that have

comparative advantage over other stocks to be a leader on the way down.

At the market bottom, you're just basically doing the opposite. You want

define the stocks that are going to be in the accumulation or reaccumulation

range that will be in phases C, D, or E.

And their comparative analysis suggests that they're going

to outperform the next move up when the market resumes its

swing.

That's the whole task.

Let's look at this.

All right, so here is four stocks or the four charts.

Here is an S &P 500.

This is, I believe, 2011.

You can have this information, but it's not really that necessary.

I'm showing you that this is the market top and that the next swing is going to

be to the downside.

So if the price is going to go down, the question that we have, is stock number

one going to be the best stock to pick for a swing to the downside?

Or is it going to be stock number two?

Or is it going to be stock number three? Or maybe all of them?

You will have to show me.

You will have to conduct structural and

comparative analysis combine them together

and make your selection

as to the stock or maybe

multiple stocks any questions on the homework

and you have four slides here so in this case

The next bias is to the upside.

We know that the market is going to go up.

So which stock out of three or maybe multiple stocks that you will be buying,

that you will be selecting as your buy?

Okay, next one.

And one more.

All right, well, let's see some questions, some comments.

Okay, a question from Nilesh. Is comparative analysis useful to identify

distribution of leading stocks with upslope in trading range?

Okay, so

we're looking at this

scenario.

Let's say this is a leadership stock, and we have higher highs.

Higher lows.

How would the relative strength behave?

It just depends on what the market is doing. So I can't really answer this

question until we actually see what the market is doing.

Let's quickly do that.

What if the market is flat?

Is the stock stronger or weaker at this point?

Yes, the stock is stronger.

Because the stock is making higher highs, higher lows, the market is flat.

Okay, how about this?

The market is doing this.

Effectively in the downtrend. Is the stock stronger or weaker?

Absolutely.

Okay, how about this?

The market is going up in line with the stock,

so same structure.

The stock is stronger or weaker?

Same structure for the market.

So stronger or weaker?

The same, right?

So the stock could behave the same way comparatively as the market.

And the relative strength line is just gonna be flat, nothing else.

And now let's say that the market is just going aggressively up.

And the stock is going up, but maybe not so aggressively.

the stock is gonna be stronger or weaker?

Weaker, yes.

So here are four scenarios that we have to think about before answering the

question whether comparative analysis is gonna be useful

here defining the distribution because usually you're gonna be having a lot of

troubles with the higher highs, higher lows.

In the distribution, it's going to look like a reaccumulation.

This most recent drive to the downside into the December lows, such a great

example of that.

Where we could have stocks like Navadir, leadership stocks, having this

pattern right here of higher highs, higher lows, and then suddenly on the

of weakness, an LPSY.

they lose all of the leadership characteristics and they become weaker.

So effectively think about what we just did with Home Depot.

In some of the cases, we had a weaker long -term picture,

and then suddenly the stock is starting to behave much better. Strength,

strength suggests some buying.

And that suggests that there's going to be a short -term outperformance.

Well, the same on the opposite, the mirror side of the

trading range, that's going to be a leadership distributional range with

highs, higher lows.

Once on the sign of weakness, we see a lot of weakness.

This is where it suggests that there's going to be a short -term.

where the stock is gonna go down much faster than the market.

So sometimes I would say that the stock is outperforming on the downside.

This means that the stock just travels to the downside

much faster and there is more selling for the stock.

So it just depends.

It really, really depends. It's all so contextual as to where we see the

where we see that relative underperformance.

One of the things with the relative performance is that when you look at the

relative performance, look at the price as well.

And both of those have to confirm what's

going on.

And we'll do an exercise on this where we are taking the relative strength and

the price, and then we're confirming the signal

of the relative strength with the signal of the price.

So we want to see the synchronicity.

Okay, next question.

Okay. For Forex traders, how can we make relative comparative analysis as you

show in this webinar how can i deduct if some um euro

pair example let's say euro against canadian dollar under is underperforming

um outperforming okay well you guys know that i've traded forex so

one of the things that i've been using is in forex you really have

to think about the pairs in terms of correlations, meaning

that a pair like euro -dollar, well, actually, let's

say euro -dollar or pound -dollar,

most of the time are going to be highly correlated.

So from this high correlation, which you could track using some websites, you

can go to those and you can find, like, at this point of time, how the two

currency pairs are correlated. Is there a high correlation or a low correlation?

And by the way, there is, you know, a cyclicality in the correlations between

the pairs.

You have to study that as well. But let's say that we define that these two

highly correlated.

So what you're going to do with this analysis is that you're still going to

two charts, and they're going to look somewhat the same because those are

to be highly correlated instruments. But at some point, a stronger

pair is to be bought, and then

a weaker pair is to be sold.

And you could use this strategy in both, let's say, pair trading,

or you could do more of the directional trading.

What do I mean by that? In the directional trading, let's say that you

the bias as an uptrend.

So then your selection is going to be the strongest of the pairs.

And you would just disregard the second pair.

In the pair trading or spread trading, you could do this. You

could literally buy a stronger pair.

and then you sell weaker pair.

And the beauty about this is it makes you somewhat neutral

to the directional bias.

So in a way, it's almost like You're taking the same asset because this is a

highly correlated asset.

You define which asset is stronger. You want to be in that asset because the

idea here is that the stronger asset is going to produce a better effect than

the weaker asset.

It suggests that institutions are more interested in that pair, so they're

to go for that rather than over another pair.

uptrend in that stronger pair should show you an out performance so it

could look something like this a stronger pair might look something like

this and then a weaker pair will look like this

so this spread initially you're gonna

take the spread out, right? I probably should have done it like this. Yeah,

let's do it like this.

So this spread right here is not going to move a lot.

But then the spread between these two currencies are going to increase.

Right? So spread is increasing. And effectively, this is how you're making

money. It's on the increase of this spread where

Because of the outperformance of the first currency, there's going to be more

interest and more push.

And then in the currency that was weaker, there's less interest

by institutions to be in the uptrend, so they will be less active.

And that's going to create that spread.

So you could benefit from the spread taking away the directional bias.

and taking the directional risk away.

You could do that.

Okay, so that's great. What else?

Okay, Phillip is asking, so this is how we use the comparative analysis in

practice where I identify the probable leader and then wait for phase C or D.

that the only use?

Well, yeah, definitely. We are in the trading range.

There is not a lot of use for us right away if we see that there is an

outperformance in Phase A.

Yes, it does suggest that maybe we are in the accumulation, that there is some

interest by institutions, and potentially this could be an

absorption of the supply that we observed in Phase A.

But we still have to go through phase B and then go into phase C. And we still

have to define what kind of relative strength performance we have here.

What if in phase A there is a lot of strength and then it just goes away?

Again, we don't know.

That's why market is so uncertain. We can't really predict what's going to

happen next.

So we have to always observe and then make a decision. And if we see enough...

observational points in phases B, C, and D.

That would suggest that institutions are present, they are aggressively

accumulating. This is the stock that we're gonna pick.

And obviously phase C and D are crucial to us, so this is where we would be

looking at the relative comparative performance.

Okay, well let's look at something different.

Let's think of

the presence of institutions through the compartment accounting.

And then we're gonna convert that into the concept of a sweet spot on the

comparative performance.

And again, this is just an attempt for us, an attempt for us

to understand what institutions are doing,

how they're behaving.

So let's go through this. This is a schematic that I've created for you guys

with a hypothetical behavioral patterns

that I'm showing here through buying and selling of the shares by big

institutions.

So let's go through this. In the downtrend, on the way down, at the point

climactic action, this stopping action creates fear.

in weak hands, so therefore they are dumping their supply.

Supply is increasing, but at the same time, because of this liquidity and

institutional demand increases.

And that's what stops the price from moving further down.

Institutions are observing the supply from weak hands relatively fast, and

stops the price from moving further up.

Their subsequent buying, pushes the price up and short professional traders

covering their position also producing a lot of buying behind that. And that

pushes the price up and creates an automatic rally, which is such a

look from everything what we've seen before. All of the attempts to rally in

downtrend, they look different than an automatic rally.

And therefore, we call this a change of character.

So it's at the selling climax where there is so much liquidity

and there is so much value.

We, as the CEO, would establish our first position. Imagine that we're a

And imagine that CEO needs to accumulate one million shares in this particular

stock.

How would they do this? They can't buy everything right away.

They're going to come into the point of the liquidity, establish this position.

And then maybe even at the top, they're going to just profit take some of it.

And that's going to push the price down, or maybe they are going to be inactive.

And with this inactivity, the weak hands would not be able to

sustain.

They move to the upside, and the price will start deteriorating to the level of

the support,

would buy again add to the position just because this is the zone where seo

would be buying that buying diminishes the supply so just to

rally the rally comes to the high to the resistance the seo might take a profit

again and i see this over and over again i see how in a lot of cases

the co type of institutions

they are willing to take some of the profits because it just stabilizes their

equity equity line and they are in more favorable situation

if the price goes down in the reaction the next support level phase c into the

spring this is where locally supply is going to increase so seo is going to

up and buy the the last number of shares from weak hands,

and that would diminish supply even more.

And that would suggest the timing.

Supply is in strong hands, or the majority of the supply, or a significant

supply is in strong hands, and now if the CEO is buying more,

then the price is going to start moving up much rapidly.

much faster.

And at this point, CEO might be buying on the way up and it can't hide it

anymore. So we'll see that first rally as a sign of strength rally. And by the

time the CEO is done with this rally, a lot of the

positional sizes are quite significant.

So we could be at the 800 ,000 number of shares at this point.

So think about availability of the supply. It was just bought throughout

the whole trading range structure in the sign of strength rally.

Absorbing the sellers that were available throughout this whole

So with that, as the absorption of supply and absorption of sellers has

happened, what kind of reaction we're going to have here well probably not of

the same quality as we had prior in the trading range

we're talking about a smaller reaction that probably going to come

into the area of the support which acted before as the resistance so for the

first time we're going to have a precedent in the trading range where

There is a sequence of buying and selling.

A sequence of buying on the rally and the not selling

on the subsequent reaction.

This sequence we're going to call a sweet spot.

Well, what does it tell us? It tells us that

As there is interest on the way up by institutions to buy, and there is no

interest to sell on the way down,

the stock is ready right now to start moving to the upside. And this could

define the timing for us as to when we should be getting into this position.

Let's look at the distribution.

And the same behaviors by institutions here.

So their goal now is to get rid of 1 million shares. How would they do this?

Well, they want to do this on the points of excitement, right? So, for instance,

into the climactic run, they can sell

500 ,000 shares, get rid of one half of the

position. Maybe they're even selling on the way down.

Remember how a lot of the stocks would see a lot of distributional

characteristics in phase A, and that would be even a reaccumulation. So we

just have to know that at some spots, some institutions will sell,

and then we will need to define how aggressive that selling is.

Does that change overall bias for us or not?

And then in some cases, as they sell, they're going to buy just a small

back just for the prices to stabilize and to push the price closer to the

previous resistance.

And that action is going to repeat itself until the COO

is going to find the opportunity to sell the majority of its supply.

And maybe even

establish some positions to the downside.

Maybe a short selling.

So here is how CO gradually gonna distribute the stock.

And obviously this is all in theory.

This is just how I view this.

This should be a little bit more updated as to how this happens.

But I want you to remember a couple of things.

See, all composite operator or the composite man is of large, large

quantity. The size of their portfolio is tremendous.

So therefore, they cannot move in and out of the position quickly.

They have to spend some time accumulating the stock or distributing

Because of how they do this, the stock might experience some relative or

comparative performance issues, like starting to underperform.

And if together with the price we see that deterioration on the relative

performance, then we could potentially say that we are in the distributional

formation.

Performance by itself.

underperformance by itself does not suggest the bias.

It just suggests that during this period of time there is underperformance.

But we could have a reaccumulation and short -term underperformance by price in

the reaccumulation and still the price would go up.

We also could have a situation where

let's say the

the distribution is going to have a lot of strength characteristics, and only at

the end of the distribution there's going to be some indication that the

relative strength has changed.

So, again, quite a few variations that we probably would need to go through and

to discuss.

All right.

Eric is asking, in the case of futures, for instance, grains versus

canola, would we use the same comparative

technique as we did with the currencies? Yes, effectively we would be looking at

highly correlated instruments.

For instance, I've used the same technique for gold and silver.

You can use the same technique for any other metals.

You could use this technique for, I've used it on my intraday level for index

trading. When I was trading futures, I would define the bias for the day. I

would define the index that would be stronger or weaker. And based on that, I

would be directionally selecting a stronger in the uptrend and weaker

in the downtrend instrument.

And that would...

bring not just the profitability up, that would

diminish my losses. Because think

about, let's say, the behavior of two assets.

One is stronger and then one is weaker.

Let's say if our stop loss was somewhere here.

If we are expecting the reaction of, let's say, the same size, let's say

like 10%, the second one might actually, just because of

underperformance, hit that stop loss, whereas the stronger asset

might have a more favorable reaction, and then the resumption of the trend,

the resumption of the trend.

So from this perspective,

outperforming asset is going to outperform on the way up and on the way

down and therefore a sweet spot.

Outperforming on the way down and underperforming on the way up and this

sequence suggests that there is a lot of selling on the way down and not a lot

of buying on the way up.

So what's going to happen with this asset?

At some point when such underperformance is going to be seen by other market

participants, they're going to start dumping the stock.

And as they dump the stock, they capitulate and they produce a lot of

the stock.

Selling is going to accelerate the price to the downside and we're going to see

gaps, big spreads, big gaps on news that are going to be...

Favorable or unfavorable, reaction might be very unfavorable, doesn't matter.

So you have to think of relative and comparative strength from an

angle of institutional presence and participation.

And hopefully this is the main message today that kind of lands into the

discussion of what we're doing here.

Okay, well, we talked about the sweet spot.

Let's talk about the sweet spot a little bit more.

So look at this example of Lulu. I'm comparing Lulu to triple Qs, that is the

NASDAQ 100 ETF.

Look into this area right here, a rally in the reaction, that the reaction is

just very small.

It's a higher low, whereas the market is making a slope to the downside.

So the stock is outperforming on both the rally and the pullback.

What can we expect?

Somebody is buying on the way up and somebody is not selling on the way down.

Who could this be? Institution or institutions.

So therefore, with their support, we're probably going to outperform in the next

rally. And look at this next rally.

We are overcoming the resistance, whereas the market overcame this

but very late.

So the stock is definitely performing much, much better. Again, why we're

looking at this whole relative comparative analysis?

Well, because it suggests that in the future, on the next run,

This stock is going to outperform just because we've seen how institutions

behaved at this spot.

That's the whole key.

We are not just want to be right, like being in the market. We want to be in

correct stock that's going to outperform the market. We want to choose something

that is going to be more significant in the performance than the market itself.

Look at the next swing spot.

uh sorry sweet spot up down up down up

down so quite a different picture here again where the market is creating short

-term weakness and the stock is creating short -term strength and that again

suggests some kind of outperformance not a lot this time but then the next one

look at how significant this discrepancy is between the

the market and the stock.

The market is going down.

The stock is trying to be flat and trying to create a

definition of the uptrend.

So already suggesting that somebody is buying as the market goes down.

And we are definitely overcoming the previous high for the stock, whereas for

the market, this is just and up thrust

multiple closes above

but there is really only one close that is significant everything else

after that is insignificant even this close here

all

right let's look at the next sweet spot.

What if we would look at the big rally and big reaction?

Looking at this rally right here, we are seeing that it overcame the previous

high, whereas the market actually did not do that.

It went into the upside situation, but nothing else was there.

And then look at the reaction.

By the time we are making the low in Qs, we're already trying to get out of this

trading range formation.

So a lot of strength right here. There is a strength on the rally itself,

overcoming the structure, overcoming the resistance for the stock.

And then reaction comes to the level of the support, whereas for the market,

we're definitely seeing.

a much more meaningful reaction to the downside.

In other words, here we are comparing significant low to another

significant low, something that we've done with Adam at the beginning of the

session. Then we are looking at the slope and we see that The stock is so

stronger at this point. And that suggests multiple things.

That outperformance suggests a good market

long -term because we're looking at the long -term sweet spot.

So a significant outperformance right here on the way out.

And hopefully we have the chart after that. If not, just go check it out.

So this idea of the sweet spot was

added to the knowledge probably like seven years ago.

And a lot of the students decided that they like this concept and they want to

test it.

And at the time, I didn't have this opportunity, but then, you know, some of

them developed those type of tests, and this is what they've seen.

So this is, again, the test from Howard Lask. You know, he is one of our

advanced students in our community, and he is the

one who has been doing a lot of technical stuff, supporting, you know,

those tables.

under the tools. So he decided to do the visual back testing of the sweet spot

concept. And he said, I want to look at the S &P and I want

to define all of the moves in the S &P, all of the swings

that

had a reversal.

and are ready to go up.

And Howard wanted to identify during the same period of time, any type of trades

that are gonna be in the same direction.

And he said, I'm gonna use the sweet spot to see if the sweet spot is gonna

outperform.

And as you could see, there is a lot of consistency.

as to how this type of performance actually

suggests that

whatever bind the institutions have had on the rally and

then on the subsequent reaction, probably the next rally is still going

outperform. And we could see that it's only in four cases.

This is where the sweet spot has not outperformed. And I think this is a

good result.

And statistically, we are outperforming in some cases quite significantly.

We have to look at exactly like why, what was in there, and so on and so

But still, I would say that we are just trying to get away from the statistical

area.

But it looks very promising. It looks really good.

In a lot of the cases,

When we observe a sweet spot, the next rally is going to be an outperforming

rally.

So this strategy is something that you could add to your portfolio if you

already have a long -term strategy.

I was thinking about this today.

Even though the majority of our students are swing traders,

I really would like to start developing.

long -term campaign type of discussions.

So we'll talk about this more and more as we progress into the practical.

Coming back to the sweet spot.

Again, this idea of the sequence of strength.

Strength on the rally and subsequent strength on the reaction.

And for the longest time when I started using this concept, for my wrong

trading, it was really hard to follow

the sequence. Sometimes the sequence would suggest that, oh yes, there is a

of rallying, there is a lot of buying on the rally, but then reaction would come

and it would be weaker.

So it's definitely could be confusing, but at the

same time,

You know, if we use this as a concept and we have some rules, guidelines

it, I think we could extract a very favorable information as to what we

select and when we should select it, especially for swing trading.

All right.

Okay, let's talk about filtering OEMs here.

We still have about...

what about maybe like 15 20 minutes let's talk about filtering and scanning

tools well here is our case study of home depot this is the last slide

we have this trading range and uh we said that we we look at the

how what the price has done we looked at the relative strength ratio line what

it's done and we are saying that uh it's probably a sign of strength in

both cases

So we want to establish some other tools that could help us identify

a change of behavior.

And now think about this. We've talked about the change of behavior, change of

character, where? In the price structural analysis.

Now we're talking about the same change of behavior in the comparative relative

analysis.

And obviously comparative relative analysis is all about the price

well. But still, all of those concepts could be applied for the relative

performance. So what other tools would we use?

Well, we definitely want to use any type of heat maps.

That should help you out as well.

We want to look at the peers, meaning we want to look at the group and the peers

in the group.

So for the Home Depot, this was the home improvement retail group.

And you can find that in stock charts.

You could find this group in a lot of other softwares.

And then for this group, we have two stocks, Home Depot and Lowe's.

And let's look at the heat map.

So the green is usually going to mean improvement.

And here for the groups, we have 156 groups, I believe.

So we went from one week on June 20th, 2014,

from being one of the worst groups in the market,

132 at that point, and then in one, two, three, four, five, six, seven, eight,

nine, in nine weeks.

We went to the top 10 group.

I want you guys to see this because this is going to be a very important point

here that we're making.

Look at what has happened during this nine weeks.

The relative strength has improved. The comparative strength has improved.

Well, where was it? Well, it was right here, and then the end of this nine

was right here. So what happened was the price. The price went up. It overcame a

long -term resistance and committed to the upside.

So a significant move to the upside produced a significant

rally on the relative strength.

We could see that this was the relative strength rise right here.

And we could see this in the heat map as well.

So heat map is just another tool for us to visualize the same concept.

But I want you to think about a heat map from a different perspective.

When we look at the heat map, we usually would look at two numbers.

We would look at the top performers.

And then we would look at the rotation.

So usually the top performance would define the stocks

in the uptrend.

And sometimes, you know, students would complain, well, the stock is already

like, you know, with such big relative strength, it usually would mean that the

stock is

traveling up. It's in the up trend.

But rotation suggests a short -term outperformance.

And the short -term outperformance could lead to a longer -term outperformance.

And that's what we want to capture, a long -term outperformance.

And then comparing it to the structural analysis, we said that this is a sign of

strength.

Sign of strength on the relative strength.

So there is some kind of nine -week rotation by institutions into this

This rotation defines the timing.

This is where the price will start leaving the trading range and start

up in a trending manner.

And we want to capture that moment because this is going to be the moment

the trend is going to emerge and we want to jump on that

okay well let's talk about the relative strength line ratio how do

we create it this is from stock charts apple daily chart

and then at the bottom under the indicators you have to

put price and then take the symbol of this stock

division column, or division sign, and then a market proxy.

You could also write something like this. You could write dollar sign,

division sign, and then a market proxy. So for instance, I could say

S &P 500, SPX.

And then all of the charts, whatever symbol I'm going to enter there,

automatically is going to create the relative strength of ratio price line

for that symbol in the S &P and this is how it's going to look

it's going to look as like this black line you could put this onto the chart

could put it on the chart and then in the advanced section

I'm going to put two moving averages

52 .13, and I probably would just change it a little bit here, but the moving

average just basically helps you to define the trend.

So look at what happens here with Apple.

We're in the distributional formation with the high highs, high lows. That was

one of the questions about could we define by the relative strength of

distribution. Well, look at the relative strength here.

It's also in this upsloping structure.

It's only when the relative strength started to deteriorate in a more

significant way and the price did the same.

That's when we could say that from a leadership characteristics.

Now the price, the behavior of the relative strength and

the price suggest that we're going to have lower prices.

deterioration of that leadership.

And that's what has happened a lot in December with a lot of the

outperforming stocks.

Like I bring Nova Deer.

We talked a lot about this.

So it's just the pattern where the leaders are going to be a flight to

until the...

last push to the downside and then they're going to capitulate right there

then look at how the relative strength and the price confirm each other when

price starts to break out and the relative strength is breaking out as

breakout breakout breakout

breakout breakout

break to the downside and the leadership changes as well.

So if we would be long -term investors, we would be saying, okay, well, if this

is an area of accumulation, I want to see the breakout of the price and the

breakout of the relative strength and follow this pattern until

it's broken right here. So this could be our exit.

So think about the long -term strategy where...

We are entering, let's say, at about 65, and we are entering at about 120, and

it takes maybe a year and a half to be in this position, and we are

almost times two on this position.

So we're probably making around 80 % annual rate on this position,

and we're just using such simple technique.

confirmation of the price and the relative strength.

And you could read more on this in the chart school.

Go to the chart school of stock charts and start searching, exploring

relative strength.

And you will see a lot of articles on that that would suggest that the

confirming signal between the price and the relative strength.

is an extremely valuable tool for us to define the emergence and the end

of the trend.

Actually, one of the homeworks is going to be based on this concept, next

homework.

Okay, now let's talk about our tools on WyckoffAnalytics .com.

Go into the indicators. I believe those are tools now, so you have to check it

out.

Use the password Wyckoff123. So obviously do not give it to anyone else.

just for students.

This page was created for our students only, and it was created by our student.

I mentioned his name.

And when we were looking at what we wanted to create, I said that it would

be nice to also have some kind of research page where you could have the

like Apple here.

see where it is from, which group, which sector, look at the chart, and then

look at the group that it belongs to, look at the rotation in

this group, and then look at the peers and be able to compare Apple

to peers.

So, for instance, we would be looking at Apple has a rotation from 68 to 41.

But then at the same time, Cray has a much larger rotation,

where from 91 in five weeks, we are getting to the

top two in the group.

So that is so valuable. What else is valuable is that in this tool, you

could do this historically.

you could go back and try looking at

the relative rotation for the whole group or for the whole

sector even, and then look at the peers and

compare their charts.

Because ultimately, when you look at one chart, let's say you look at Apple,

Before you buy Apple or before you sell Apple, you have to look at other stocks

in the same group.

You might be missing something. Look at where Apple is.

Even though there is a rotation, a really good rotation, but there are

stocks above Apple that are much stronger at this point of time.

So we will have to think about what to choose from the peers

as well. Maybe there are some...

better candidates that were available at that point of time so use this page

it's updated each friday and um

uh please you know keep this access confidential

there is another page under the same uh tools uh navigational pattern

it's called the heat map so we've talked about the heat map here with Basically

exploring the top -down approach where we look at the sectors first

and we define the leadership in the same way.

We define the leadership as the top leadership.

So most likely this is going to be already in the uptrend, depending

on the market conditions.

And then we also want to define the leadership as rotational leadership

coming from, let's say, eight to five, seven to four

in telecommunication services.

So it's when we see this rotation, we're thinking institutions are coming into

this space, into this area.

So therefore,

we need to look at this rally and make an assessment as to

are there any candidates that would show the relative strength,

show the correct structure, and show us the correct timing.

So what we would do, and this is an example of where we would,

what would we do here? This was...

consumer discretionary right and then um we would look at the consumer

discretionary and we would say oh okay under the footwear we see such a big

rotation let's look at some of the stocks in the footwear and looking at

top stock here sketches also there is some very favorable rotation

and then just staying at the

top of the leaderboard.

So this is a selection process for us where we identify the

market bias first.

Then we go to the sector level and we say, yeah, I want to look either at the

leadership or I want to look at the rotation.

And then in that leadership or rotation, I want to find the group that's going

to have the same characteristics, either leadership or rotation.

I want to look through both of them. And then look at all of the peers and,

again, define leadership or define, let's say, a rotation.

And look at those charts.

That's our process.

We are using the concept of the relative strength as a filter

mechanism to get to the stocks that are right away showing some presence of

institutional activity.

And then we start analyzing the structure. And then we start analyzing

and demand.

In a lot of cases, students ask me, well, can I do structural analysis first

then relative strength? You definitely can, but imagine that.

If you want to look through the whole market, then if you do the structure

first, it's going to take you more time.

All right, so use this for sure.

Okay.

Let's stop here. Yeah, 530. Let's stop here because I wanted to add something

the selection process.

So this is just the intro for us as to how we look at the relative strength,

we look at the comparative strength analysis.

This is the intro on the differences. This is the intro on the understanding

why this is so important, why we need to understand that the stock is starting

to outperform in the trading range and so on and so forth.

I'm also showing you different tools, so I want you to get comfortable with

those. So go to our website, use the password, play around with the heat map,

play around with the research page.

Then go to stock charts, play around with the relative strength line, create

one.

I'm showing you how.

And then do the homework.

Don't forget, you have the homework.

Here's the homework.

Four slides.

Each slide has a market and three stocks.

I'm giving you the bias for the next swing.

You have to define which stock is not only going to go in the direction of

bias, but it's going to outperform, either to the downside or to the upside.

It doesn't really matter. We just want to see the outperformance over the

market.

And then we're going to start the next class with the review of this homework.

And it's a lot of fun. This homework is usually a lot of fun for students at

this point of time.

And then in the next class, we're going to talk about the selection process, and

we're going to be a little bit more deliberate as to how we actually get to

the stocks that we want to look at.

All right, guys.

This is it for today.

And I'll see you next week.

Send me your homeworks. Thank you so much for being here.

And have a wonderful week.

Thank you, guys.

Bye -bye.