My quick answer would be YES, but there are limitations to every technical indicator or tool and you should be aware of them.
First, for those of you not familiar, SCTR is simply an acronym for StockCharts Technical Rank. It is a relative strength system developed by John Murphy, a stock market technician that has heavily influenced my work through his books and other teachings. I have tremendous respect for John and his work has inspired much of my own intermarket relationship research and analysis. But a SCTR score is really only applicable to the most recent 5-6 months.
If you review the formula in ChartSchool over at StockCharts.com, you'll find that nothing in the formula is based on any price action from prior to that last 5-6 month period. Looking at the SCTR changes over the past week for large cap stocks, Moderna (MRNA) has seen its SCTR score ascend more rapidly than any other stock. Check out its chart:
Enter Moderna (MRNA):
I've inserted the SCTR onto the MRNA chart, so that you can see its relative strength rapidly improving, right along with its stock price.
The primary limitation with the SCTR, in my opinion, is that it's only concerned with the last 5-6 months. So you could be looking at a stock that's showing great relative strength in the very near-term, but doesn't necessarily have a very good long-term track record.
The SCTR also is just one piece of technical evidence. If you look at the chart above, you'll see that MRNA shows a lot of technical improvement (blue circles), but in the price chart, a major price resistance level is approaching just shy of 190 - from the price high established in the second half of March. In order for MRNA to keep its momentum going, breaking above 190 will be critical.
What does this mean?
- The SCTR score can help us identify improving stocks, but there's still plenty of work to be done to confirm that improving relative action.
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Happy Trading!Tom BowleyChief Market StrategistEarningsBeats.comBetter Timing. Better Trades. |