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  • Writer's picturePeet Serfontein

Relative Price Strength - 21 June 2023

Relative Price Strength (RPS) is a trading strategy to assist traders to make more informed trading decisions.

At present 135 odd shares are constituents of the JSE All Share index. This number is too large for any trader to screen at frequent intervals. However, the least time-consuming and most objective method is to screen all shares based on a periodic basis using Relative Price Strength (RPS).

  • Traders are rewarded for buying the strongest shares and avoiding the weakest or short-selling those.

  • Strong-performing shares tend to get stronger, while the weak tend to get weaker. This makes sense because markets love their winners and hate their losers.

Industry vs sector

  • Although some may think of them as the same, the terms "industry" and "sector" have different meanings. Industry refers to a specific group of similar types of companies, while sector describes a large segment of the economy.

  • In the equity market, the generally accepted terminology cites a sector as a broad classification and an industry as a more narrow one.

  • Industry Classification Benchmark (ICB) is a comprehensive and rules-based, transparent classification methodology based on research and market trends designed to support investment solutions.

  • Its four-tier structure offers a robust system for comparing and analysing like organisations.

  • It consists of 11 Industries., 20 supersectors, 45 sectors, and 173 subsectors.

  • We will use some of this classification methodology in this analysis. We will refer to industries (Industrial, Financial, and Resources) and some sectors.

Flow of capital

  • Fund flows or capital flows are a reflection of cash that is flowing in and out of financial assets.

  • Traders and investors can look at the direction of the cash flows for insights into the health of a specific industry, sector, or share of the overall market.

  • If money is flowing into an industry or sector, prices usually tend to increase in value. When money is flowing out of an industry or sector, prices usually tend to decrease in value.

  • When determining the flow of capital into or out of an industry or sector, one can align your trading and investment decisions accordingly.

The domestic flow of funds for the industries or headline indices:

  • This analysis is updated on a daily basis using end-of-day data. The lookback period is the last 10 days.

Inflow: Financials

Outflow: Industrials & Resources

JSE shares

  • The table below ranks the shares according to the top 20 inflows and top 20 outflows (the arrows indicate the change from the previous update):

JSE sectors

  • The table below ranks the sectors according to the top 10 inflows and top 10 outflows:

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