The RS Line

How the RS line is built, why a rising line matters more than the price itself, and why an RS line hitting a new high before price is one of the strongest signals on a chart.

Built from a simple division

The RS line divides a stock’s price by an index price, such as the S&P 500, every day, and plots the result. The actual number does not matter. The direction does. When the line rises, the stock is beating the market. When it falls, the stock is lagging. A flat line means the stock is keeping pace.

Many charts draw the RS line under the price bars, scaled to fit. Our lesson charts do the same, in purple.

Illustration: the stock rises faster than the index, so the RS line climbs.

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