Time to short auto, long oil?

If you superimpose two charts of BSEOIL and BSEAUTO together, you will see two similar looking charts with increase and decreasing gaps between them. Just by looking at charts one can attempt to judge outperformance and underperformance of the respective sectors, but it’s not easy. This is because Elliott waves can extend, oversold assets can remain oversold or stagnant for a longer time and trendline breaks may not give sustained reversals.

To improve on this ability to judge performance technicians use relative performance. This is a ratio line, which indicates whether the ratio between two assets is rising or falling. A falling ratio is underperformance for the Numerator asset and vice versa.

In the case illustrated here, we have the ratio line …

This article was written for Association of Technical Market Analysts
Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.
Coverage India: BSE500 traded stocks and Indian Indices.