RS Rating: Back the Strongest Horses
The market rewards the leaders longest. RS Rating is a single number — 1 to 99 — that tells you exactly where a stock ranks against all others. If you buy only the top-ranked stocks in a bull market, you are systematically putting yourself in the same positions as institutional momentum.
An RS Rating of 90+ means this stock outperformed 90% of all other stocks on a price-performance basis over the past 12 months. In bull markets, the highest-RS stocks tend to keep leading. William O'Neil's CANSLIM research found that the best stocks had RS 87 or above before their major breakout — meaning they were already outperforming before most people noticed.
How is RS Rating calculated?
The RS Rating is a relative ranking — it measures your stock's 12-month price performance against every other stock in the universe, then converts that to a 1-99 percentile score.
| Component | Detail |
|---|---|
| Lookback period | 12 months of price data, with the most recent 3 months weighted more heavily (recent momentum matters more) |
| Comparison universe | All actively traded stocks — typically 7,000+ names |
| Output scale | 1-99 percentile. RS 90 = outperformed 90% of all stocks in the universe over 12 months |
| Daily update | RS recalculates every market day — as the 12-month window rolls forward, scores shift |
| Recent weighting | The last quarter of the 12-month window is weighted ~2-4× more than earlier periods |
What do the RS Rating zones mean?
Note: RS Rating is relative, not absolute. In a bear market, even RS 90 stocks are falling — they are just falling less than 90% of the universe. Always pair RS Rating with Market Regime (Lesson 1) before taking long positions.
The RS line — a more visual approach
Before modern software computed RS Ratings, traders drew an RS line by dividing the stock's price by the S&P 500 price. When the line trends up, the stock is outperforming the index. When it trends down, the stock is lagging.
The best signal: the RS line breaks to a 52-week high before or simultaneously with the price. This tells you relative strength is expanding, not just keeping pace. O'Neil called this the most reliable pre-breakout signal he ever found.
How to use RS Rating as a filter
RS Rating is best used as a filter, not a buy signal. It narrows your universe from thousands of stocks to the handful worth spending time on.
| Use case | How RS helps | RS threshold |
|---|---|---|
| Momentum breakout scanning | Only look at stocks with strong recent performance — leaders break out stronger | RS ≥ 90 |
| VCP / base setups | Tight consolidations in leading stocks produce the cleanest pip extensions | RS ≥ 85 |
| Broad bull market filter | Focus watchlist on top performers when SPY is above EMA 200 | RS ≥ 80 |
| Avoid laggards | Lagging stocks have structural selling pressure — skip unless fundamental catalyst | RS < 50 |
| Bear market exception | Short candidates are the weakest stocks (RS 1-10) in sectors under distribution | RS ≤ 10 |
Combining RS Rating with your full toolkit
A high RS Rating alone does not make a trade. It makes a candidate. Here is how it stacks with the indicators you have learned.
| Signal combination | What it means | Trade quality |
|---|---|---|
| RS 90+ & EMA 20 > 50 > 200 & BOS | Leading stock in uptrend breaking structure — textbook leadership setup | ★★★★★ Highest |
| RS 90+ & OBV at highs & CMF > +0.10 | Relative strength confirmed by smart-money volume — institutional backing visible | ★★★★ Very high |
| RS 90+ & Bollinger squeeze resolving up | Compressed leader about to release energy — ideal entry before price discovery | ★★★★ Very high |
| RS 90+ & MACD histogram shrinking & RSI > 75 | Leader but momentum waning and extended — wait for reset before entry | ★★ Wait |
| RS 90+ & market regime = bear (SPY below EMA 200) | Strong relative but no macro tailwind — leading in a falling market, skip long | ★ Skip |
Three common RS Rating mistakes
- Chasing after a huge RS spike. A stock that jumps from RS 40 to RS 92 in one month just had a gap-up earnings move. The rating is backward-looking. Check if the base is constructive before buying into elevated RS.
- Ignoring the RS line trend. A static RS 90 score that has been declining for 4 weeks means the stock is losing ground to the market. Prefer RS 80 that is rising to RS 90 that is falling.
- Using RS alone in all market regimes. In a bear market, chase the short side: the lowest RS stocks in the weakest sectors. The high RS list becomes a shorting watchlist when breadth is collapsing.
Check RS Rating for any stock
Open MadStocks, search a ticker, and see where it ranks vs the full market. Combine it with BOS and CMF to identify only high-conviction candidates.