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As BAC dropped to $8.25 (line 2), the RS line dropped back below its WMA. The RS line made marginal new lows in June, so there are no strong signs yet that a weekly low is in place. A move in the RS above the March highs (line g) would be a sign that a more important low was in place.

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Looking at the daily RS analysis of BAC, the rally in early 2012 was tradable. At the end of December 2011, the downtrend that went back to the June 2011 highs (line a) was broken. The RS then moved above the prior high (line b), which indicated that a bottom was in place (line 1). BAC traded in a narrow range ($6.06 to $6.30) the following day.

BAC rallied until February, when it developed a three-week trading range. The breakout of the range was confirmed by the action of the RS, as BAC quickly surged to a March high of $10.10. For two weeks, BAC traded in a fairly narrow range before it closed below its 20-day EMA, and the RS line also dropped below its WMA.

I have found that when the daily RS analysis is topping and the weekly is not in a strong uptrend, it is a reason for caution. If instead, the weekly RS analysis for BAC had been moving higher for some time, the daily action would have suggested a period of consolidation, not a top.

The daily RS by April was below its WMA, and had begun a new downtrend. At this time, the weekly RS line was also below its WMA.

The hourly analysis may have helped you fine tune both your entry and exits in BAC. By the end of December, the hourly RS was already in a short-term uptrend, with the 21-period WMA above the 54-session SMA..

The RS had formed higher highs on January 3, and the test of the 20-hour EMA could have been a good entry. The bottom formation was completed during the first hour of trading on January 5, as the prior high (line d) was overcome. BAC was then trading at $6.

The flag or continuation pattern that BAC formed in February is easier to see on the hourly chart, and the tight range in the RS suggested a bullish setup. BAC rallied sharply for the next four days, hitting an intraday high of $10.10 before reversing to close the day lower.

The hourly RS analysis turned negative on March 29, starting a new downtrend, as both MAs were already trending lower (line 3). The longer-term uptrend in the RS line was broken on April 10, but by then BAC was almost 6% lower.

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Apple (AAPL) has been a stellar performer for the past decade, and the stock is widely watched by investors as well as the general public. Because it makes up 18% of the Nasdaq-100 and Powershares QQQ Trust (QQQ), its price action often allows it to move the market.

In a prior article on relative performance, “Spot Leaders and Losers with RS Analysis,” I discussed how AAPL bottomed ahead of the overall market in early 2009. The RS analysis has been quite useful in identifying corrective periods in Apple’s stock, as well as spotting new entry points.

The weekly chart of Apple (AAPL) shows that in July 2011 (line 1), the relative performance completed a bottom formation by moving above eight-month resistance (line a). It kept moving higher for the next month while the major averages were dropping sharply.

The stock rose about 10% into the latter part of October, when the RS line formed a short-term negative divergence before dropping below its WMA at the end of the month. This began a three-month correction, as the RS line dropped back to long-term support (line c).