Understanding Relative Strength – How to Identify Market Leaders (+ Jesse Livermore)

Welcome to the Beginners in Stock Trading Newsletter! Over the next several months, you’ll receive expert insights, proven strategies, and real-world examples from some of the greatest stock traders in history.

Every newsletter has 2 sections. The 1st section is devoted to learning. Each building on the previous day’s lesson in logical order. Giving you a full, free trading education in under ten minutes a day.

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The 2nd half of the newsletter is a briefing on 1-3 stocks in the news. Read it. Then click on the links to see the corresponding charts inside the original articles. This will accelerate your ability to read the charts.

Learning to how to trade will change your life.

✅ What Relative Strength (RS) is—and how it predicts stock outperformance.
✅ How RS is used in both the CAN SLIM and SEPA strategies.
✅ How Jesse Livermore found winners by following the strongest stocks in the market.

Before a stock delivers a big breakout—it’s usually already outperforming the market.

That’s the hidden power of Relative Strength. It tells you what’s leading before it makes headlines.
And if you’re serious about trading the best stocks, RS should be front and center on your screen.

📖 William O’Neil wrote:

✅ Relative Strength (RS) measures how a stock performs compared to the overall market.

Most platforms assign an RS Rating from 1 to 99:

📖 Mark Minervini uses RS in every screen:

Livermore didn’t have RS scanners, but he knew where the power was:
📖 “I always bought the strongest stock in the strongest sector.”
He’d watch which stocks were hitting new highs while others chopped around.
That was his green light.

✅ 1. Screen for RS Ratings 90+

✅ 2. Match RS with Proper Base Formations

✅ 3. Watch the RS Line (Not Just the Rating)

✅ 4. Use RS to Filter Your Watchlist

❌ Ignoring RS altogether—treating all stocks equally
❌ Assuming price movement = leadership (it doesn’t)
❌ Buying low RS names hoping for a turnaround
❌ Not using RS to stack the odds in your favor

📖 Livermore warned:

✅ RS Rating is above 85, ideally 90+
✅ RS line is rising, not falling
✅ Stock is in a top-ranked industry group
✅ RS is climbing while price is forming a base
✅ RS matches fundamental growth metrics (EPS, sales, margins)

✅ Log into your preferred charting tool:

✅ Screen for stocks with:

✅ Pick 3–5 stocks and journal:

📌 Understanding stock price growth:
Look up the historical stock chart of Apple (AAPL) from 2004 to 2024. Notice how the stock’s price has risen steadily over time with some pullbacks.

Use these market tools to scan for and review stocks:

✅ MarketSmith (MarketSurge) – Premium Market Analysis and Scanner Tool
✅ Charts.com – Budget-Friendly Charting Option
✅ TradingView – Free & Subscription Stock and Crypto Charts
✅ DeepVue – MarketSurge Inspired Analysis and Scanner

👀 Seeing real-world stock patterns helps train your eye for long-term trends.

Our Sister Newsletter. Because everyone’s a Beginner in something.

News
On Thursday, U.S. markets rallied, driven by strong earnings from tech giants Microsoft and Meta Platforms. Microsoft's stock surged 7.6% after reporting an 18% increase in earnings and a 13% revenue boost, propelled by cloud computing growth. Meta Platforms also rose nearly 5% following robust quarterly results, although it met resistance at its 50-day moving average. The Nasdaq composite led the advance, rising 1.5%, while the S&P 500 and Dow Jones Industrial Average gained 0.6% and 0.2%, respectively. Growth stocks outpaced value stocks, with small caps also seeing gains.​

Despite the positive momentum, trade tensions remain a concern. China announced it is "evaluating" the possibility of resuming trade talks with the U.S., amid ongoing tariff disputes. Apple and Amazon reported mixed earnings, with Apple falling slightly due to concerns over increased costs from tariffs, and Amazon providing weak profit guidance. Investors are advised to monitor these developments closely, as they could impact market dynamics.​

👉 Read More Here

Specialty Metals Maker Breaks Out with Earnings Strength

Carpenter Technology (CRS), a manufacturer of high-performance specialty metals, is gaining attention after breaking out from a double-bottom base. The company reported a 58% year-over-year increase in earnings to $1.88 per share for the March quarter, surpassing analyst expectations. Operating income surged 81.5% to $137.8 million, and the company raised its fiscal year operating income forecast to between $520 million and $527 million.

The stock recently surpassed its buy point of $198.48 and remains within the buy zone up to $208.40. With a 97 Composite Rating and a 94 Relative Strength Rating in the IBD database, CRS has been added to the IBD Leaderboard, indicating investor confidence in its long-term potential.

📊 Key Facts:

🧠 What This Teaches Traders:

5 referrals How to Make Money in Stocks Complete Investing System by O’Neill

10 referrals How to Make Money in Stocks Success Stories by O’Neill

15 referrals How to Make Money in Stocks, Getting Started by Matthew Galgani

30 referrals Trade Like a Stock Market Wizard by Mark Minervini

50 referrals Lifetime access to the upcoming video courses and 50% off live events and digital products

Thank you for reading. We’re all Beginners in something!

-Beginners in Stock Trading Team