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StockCharts.com users can chart relative performance using ratio charts. In the symbol box, enter the first symbol, a colon and the second symbol (e.g. QQQ:SPY). The ensuing price plot shows the performance of the first symbol (QQQ) relative to the second symbol (SPY). QQQ is outperforming SPY when the ratio rises and underperforming SPY when the ratio falls. The chart below shows the QQQ:SPY ratio in the main window and the middle indicator window. As with any price plot, chartists can draw trendlines and mark support or resistance levels. It is even possible to apply an indicator, such as RSI, to this ratio plot.
Click this image for a live chart.
The Price Relative, as this ratio plot is referred, is often used to find securities that are outperforming. Think of the second symbol as a benchmark of sorts. Chartists can compare the performance of a stock against the broader market (IBM:SPY), a sector against the broader market (XLK:SPY) or a stock against its sector (AAPL:XLK). Chartists can also compare two stocks, such as Apple against Google (AAPL:GOOG). Want to know who is winning war? Check out a ratio chart.
