(CA|RS) Caruso Adaptive Relative Strength

Dec 20, 2022

Caruso Adaptive Relative Strength helps an investor identify when a stock is performing better than an index on a relative basis. Going beyond traditional Relative Strength(RS) methods, CARS uses a stock's Beta to determine when Relative Strength is present when adjusting for the individual stock's volatility and correlation to its benchmark. Therefore, it allows investors to not only visualize if a stock is outperforming an index but rather if it is outperforming when considering the stock's Beta. This allows Relative Strength to be more easily viewed in lower volatility equities as well as ETFs, Commodities, and alternative assets. To be as effective as possible, I have built CARS to be an RS composite, and it factors in RS from different time periods in making its calculation.

To make the application as simple as possible, I designed CARS to change the background of the chart to blue when Relative Strength is identified. You also have the option to display a box around the data or plot symbols along the bottom of the chart to best suit your visual need. CARS access comes with CARS Signal access which is a separate indicator that plots below the price chart. It provides greater insight into the robustness of the CARS signal by displaying how many core internal components of CARS are displaying RS.
Importantly, you can also change which index or symbol you would like to use for comparison purposes. I have the default set to the S&P 500, but you can use any index, ETF, or security for comparison.
CARS is also adaptable to any time frame.

The greatest benefit in identifying Relative Strength is to discover which stocks are outperforming an index, therefore are undergoing accumulation. It is important to then time your entry into the stock when the price confirms. If an investor is seeking absolute price gains, then this last point of timing an entry is critical because a stock can outperform an index yet still fall - albeit less than the index.

Aug 5, 2023

Release Notes

Version 2.0

■ Added an option to create custom alerts upon entering or exiting CA|RS.