Realty vs. Infra

The Infra and Realty indices have been the worst performers since the year 2009. Now, if one were looking to buy more or to make fresh allocation to these beaten down sectors which one would you chose? Let us see if relative strength can answer this question.

Relative strength (RS) measures the relationship between two assets. An RS line is calculated by dividing the price of one asset or index by another. A rising RS line means that the numerator is outperforming the denominator i.e. the numerator will gain more than the denominator or it will fall less than the denominator.

Both the indices are above their 40 week moving averages which is signalling a positive outlook for the medium term as long as they trade above their 40 week MA. But which index/ sector can give us a better return from this point? Have a look at the 3^rd chart below. It is simply the ratio of the Realty index divided by the Infra index. The ratio has moved back above its prior supports and the ratio has closed above its 40 week moving average. These 2 signs show that the Realty index could be a better performer than the infra index going forward. There can be whipsaws in this process but this it can help us identify high probability trades which can help decide where to allocate money better.

Thanks for reading! J

CNX Realty/ CNX Infra :