Real Relative Strength Breakout & Breakdown

Real Relative Strength Breakout & Breakdown Indicator

What It Does
Identifies high-probability trading setups by combining:

Technical Breakouts/Breakdowns - Price breaking support/resistance zones
Real Relative Strength (RRS) - Volatility-adjusted performance vs benchmark (SPY)

Key Insight: The strongest signals occur when price action contradicts market direction—breakouts during market weakness or breakdowns during market strength show exceptional buying/selling pressure.

Real Relative Strength (RRS) Calculation
RRS measures outperformance/underperformance on a volatility-adjusted basis:
Power Index = (Benchmark Price Move) / (Benchmark ATR)
RRS = (Stock Price Move - Power Index × Stock ATR) / Stock ATR
RRS (smoothed) = 3-period SMA of RRS
Interpretation:

RRS > 0 = Relative Strength (outperforming)
RRS < 0 = Relative Weakness (underperforming)

Signal Types
🟢 Large Green Triangle (Premium Long)

Condition: Breakout + RRS > 0
Meaning: Stock breaking resistance WHILE outperforming benchmark
Best when: Market is weak but stock breaks out anyway = exceptional strength
Use: High-conviction long entries

🔵 Small Blue Triangle (Standard Breakout)

Condition: Breakout + RRS ≤ 0
Meaning: Breaking resistance but underperforming benchmark
Typical: "Rising tide lifts all boats" scenario during market rally
Use: Lower conviction—may just be following market

🟠 Large Orange Triangle (Premium Short)

Condition: Breakdown + RRS < 0
Meaning: Stock breaking support WHILE underperforming benchmark
Best when: Market is strong but stock breaks down anyway = severe weakness
Use: High-conviction short entries

🔴 Small Red Triangle (Standard Breakdown)

Condition: Breakdown + RRS ≥ 0
Meaning: Breaking support but outperforming benchmark
Typical: Stock falling less than market during selloff
Use: Lower conviction—may recover when market does

Why Large Triangles Matter
Large signals show divergence = genuine institutional flow:

Stock breaking out while market falls → Aggressive buying despite headwinds
Stock breaking down while market rallies → Aggressive selling despite tailwinds

These setups reveal where real conviction lies, not just momentum-following behavior.
Quick Settings
RRS: 12-period lookback, 3-bar smoothing, vs SPY
Breakouts: 5-period pivots, 200-bar lookback, 3% zone width, 2 minimum tests