Sector Rotation Momentum Framework — Strategy by AIScripts
By AIScripts
Performance Metrics
- Author: AIScripts
- Symbol: NASDAQ:SPCX
- Timeframe: 3 minutes
- Win Rate: 40.9%
- Profit Factor: 1.161
Description
OverviewMarkets rarely move with every sector advancing or declining at the same pace. At different stages of the market cycle, some sectors may strengthen while others lose momentum.This framework compares the performance of a selected stock with a related sector ETF to provide additional context when evaluating trend direction. Rather than analyzing a stock in isolation, the script studies whether the stock is outperforming or underperforming its sector over time.The objective is to demonstrate one approach to incorporating relative performance into a rules-based trading framework.Core IdeaA stock's price movement can be viewed alongside the broader sector it belongs to.For example:NVIDIA compared with the Technology Select Sector SPDR Fund (XLK)JPMorgan Chase compared with the Financial Select Sector SPDR Fund (XLF)Exxon Mobil compared with the Energy Select Sector SPDR Fund (XLE)Comparing relative performance may provide additional context when studying trends.Strategy LogicRelative PerformanceThe framework calculates a ratio between the current chart and a selected benchmark ETF.When the ratio increases, the stock is outperforming the benchmark.When the ratio decreases, the stock is underperforming the benchmark.Trend ConfirmationA moving average is used to identify the primary trend on the current chart.Relative Strength FilterTrades are evaluated only when both:The trend direction aligns with the moving average.Relative performance remains above its smoothing average.Risk ManagementATR-based stop-loss and target levels adjust according to market volatility.FeaturesRelative performance comparisonSector benchmark analysisTrend confirmationATR-based exitsConfigurable benchmark symbolIntended UseThis framework is designed as an educational example of comparing a security with a sector benchmark. It can be used to study:Relative performanceTrend alignmentSector participationCross-market comparisonDisclaimerThis script is provided for educational and research purposes only. It demonstrates one approach to comparing a security with a benchmark using Pine Script. It does not predict future market behaviour and should be independently tested before being incorporated into any trading workflow.