Sector Relative Strength and Trend Confirmation with ATR-Based Exits

Summary

This rules-based framework compares a charted stock with a configurable sector ETF using a price ratio and a moving average of that ratio. It combines relative performance with a fast and slow exponential moving average on the stock itself: long signals require an upward trend and relative strength above its smoother, while short signals require the opposite conditions. The benchmark series is requested without lookahead. ATR-based stop and target levels scale with recent volatility, and the target distance is set as a multiple of the stop distance.

The description presents the script as an educational example of incorporating sector context into trend assessment and gives stock-to-sector examples. It includes configurable trend, relative-strength, and risk parameters, but supplies no backtest results, transaction-cost analysis, or evidence that the rules predict returns. Results may depend on benchmark choice, chart timeframe, and execution assumptions; the framework does not itself implement a multi-sector allocation or rotation process.

Key ideas

• The strategy measures a stock’s relative performance as its price divided by a selected sector ETF’s price.
• Long and short entries require both a matching moving-average trend and relative strength on the corresponding side of its smoother.
• ATR determines stop distance, while a configurable reward-to-risk multiple determines the target distance.
• The benchmark request disables lookahead, but the document provides no performance evaluation.
• The framework compares one security with one benchmark rather than rotating a portfolio across sectors.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.