Comparing a stock to a Index to determine if it has strength has been used since the days of the Japanese rice traders. If your stock has a better relative strength that the rest, then it is the strong one of the bunch, and the next time the buyers return to the sector you can bet your stock will be the first and best to gain from new fund flow.
The real secret behind relative strength is when the market is been sold down 3% to 25% plus, the masses of analyst have to sell something to raise cash for fund redemptions (investor wanting their monies back), and there is sell order by preference. The ugliest get sold first, the favorites sold last. Because the back room analyst knows the favorites will be higher after the general market panic is over.
Relative strength (alpha) is the analyst report that is rarely wrong. Knowing this you need the smartest tools to monitor relative strength changes. readtheticker.com has an a relative strength scanner and custom alpha tables.
Below is one of our MyAlpha charts of AUY versus the XAU (or AUY divided by XAU)
The top chart shows AUY changing more favorably in percentage terms, the bottom chart shows the AUY has more green and blue price rally mountains than the XAU. When gold stocks are back favor, then AUY is first on the list. The institutional analysts like this one very much! Relative strength is best free report you will ever get.