Up and down then up again. Even our moods are up one day and can be in the basement the next. Although it is true price movements in one direction don't continue forever, they can continue for longer than you suspect. And this leads to a very important statistical fact. The more a stock or sector outperforms the market, the more likely it will continue to do so.
Success usually begets more success.
Anyone who reads my column knows I read Investors Business Daily. William O'Neil, the editor of IBD, did a study that looked at thousands of the biggest winning stocks over a 40-year period. Of course the opposite is true also. The more a stock or sector under performs, the more likely it will lag its peers in the future. Relative strength is simply a measure of a stock or index's price performance relative to its peers over a given period of time.