Relative Strength and Rotation Graphs
A rotation graph shows which sectors are beating the market and whether that lead is growing or fading, on one chart.
- Relative strength compares a sector with the market, not with zero.
- RS-Ratio says whether a sector is ahead of the market; RS-Momentum says whether that lead is growing.
- Sectors usually move clockwise: Improving, Leading, Weakening, Lagging.
Relative strength in one line
Relative strength (RS) is a sector's price divided by the benchmark's price, for example Nifty IT divided by Nifty 500. If the line rises, IT is doing better than the market, even if both are falling.
The two axes
A rotation graph turns relative strength into two numbers. RS-Ratio (horizontal) shows whether the sector is ahead of the market: above 100 means ahead. RS-Momentum (vertical) shows whether that relative strength is speeding up: above 100 means the lead is growing.
This site uses its own calculation: RS-Ratio = 100 × the 10-week average of RS divided by its 30-week average, and RS-Momentum = 100 + 2.5 × the 4-week change in RS-Ratio. Charts of this kind are often called RRG-style charts.
The four quadrants
Sectors tend to travel clockwise through four boxes, though not always and not at a steady speed. The tail on each dot shows the last few weeks of its path.
- Leading (top right): ahead of the market and gaining.
- Weakening (bottom right): still ahead, but the lead is shrinking.
- Lagging (bottom left): behind the market and still losing ground.
- Improving (top left): still behind, but catching up.
Common mistakes
- Reading Leading as “will keep going up”. It describes the past few months relative to the market.
- Ignoring the benchmark. A sector can be Leading against Nifty 500 while falling in price.
- Over-trading small moves near the centre, where the quadrant can flip week to week.
Common questions
What does RS-Ratio above 100 mean?
The sector's relative strength is above its own recent average, so it has been doing better than the benchmark.
Why do sectors move clockwise on a rotation graph?
Relative momentum usually turns before relative strength does. A sector first starts catching up (Improving), then gets ahead (Leading), then its lead fades (Weakening) before it falls behind (Lagging).
Weekly or daily rotation graph?
Weekly charts are smoother and suit swing and positional views. Daily charts react faster but flip quadrants more often.