What it is
Relative strength compares a stock's price change with the market's over the same stretch of time. A stock up 30% while the S&P 500 rose 10% is 20 percentage points ahead of it. The comparison is often drawn as a line, the stock's price divided by the index's. A rising line means the stock is doing better than the index, whether both are rising or both are falling.
Not the same as RSI
Relative strength and the Relative Strength Index share a name and little else. RSI compares a stock's own recent gains with its own recent losses, on a scale of 0 to 100. Relative strength compares the stock with the market.
How traders read it
Academic research on momentum, starting with Jegadeesh and Titman in 1993, found that stocks that beat the market over the prior three to twelve months tended to keep beating it over the next few months, on average and with sharp reversals along the way. That describes averages across many stocks, not what any one stock will do. It is why many stock screens sort by relative strength.
A stock's own change still matters: a stock down 5% in a market down 20% has strong relative strength and is still down.
Relative strength on Breakaway
Members can draw a relative strength line against the S&P 500 under any stock's chart, and see where its weighted change over three to twelve months ranks against every stock the scanner covers. Relative strength against the index is not itself part of the Quality Score, though the score's run-up line adds points for a large gain over the past six months or year.