RSI/CCI Correlating Oscillator

The RSI/CCI Correlating Oscillator indicator provides a unified momentum analysis tool by correlating the Relative Strength Index (RSI) and the Commodity Channel Index (CCI) on a normalized scale. This script helps traders identify trend strength and potential market reversals by visualizing two distinct momentum perspectives within a single oscillator window.

Usage

The Usage section focuses on interpreting the dual-oscillator output for trend and momentum signals.

• RSI Analysis: The RSI is plotted as a thick histogram-style line. It is normalized around a 0-midline. Users can identify trend direction based on whether the RSI is above or below zero. The color-coding follows a logic similar to MACD, where bright colors indicate momentum growth in the trend direction and faded colors indicate momentum contraction.
• CCI Analysis: The CCI is plotted as a thinner line. When the CCI exceeds its upper or lower bands (calculated based on the sensitivity input), it changes color to signal extreme strength or weakness.
• Correlation: By viewing both indicators together, traders can look for confluences. For example, if both the RSI and CCI reach overbought territories simultaneously, it may indicate a stronger reversal signal than one indicator alone.

Details

This script implements a modified version of the RSI and CCI to ensure they are comparable on the same scale:

• RSI Normalization: Standard RSI oscillates between 0 and 100. This version subtracts 50 from the value to center the "neutral" zone at 0, allowing for easier visual correlation with other zero-centered oscillators.
• CCI Scaling: The CCI typically has much larger swings than the RSI. A "Sensitivity" parameter is introduced to divide the CCI value, effectively scaling it down so its movements fit within the visual range of the normalized RSI.

Settings

RSI Settings

• RSI Length: The lookback period used to calculate the Relative Strength Index.
• RSI Overbought: The upper threshold for the RSI (standard is 70).
• RSI Oversold: The lower threshold for the RSI (standard is 30).

CCI Settings

• CCI Length: The lookback period used for the Commodity Channel Index calculation.
• CCI Sensitivity: An adjustment factor used to scale the CCI values to better align with the RSI visualization.

FAQ

How do I use the RSI/CCI Correlating Oscillator?

You can use it to find confluence between momentum (RSI) and trend volatility (CCI). Look for both indicators to reach extreme levels or cross their respective midlines simultaneously to confirm trade setups.

Why is the RSI centered at zero?

The RSI is centered at zero to allow for a clearer visual correlation with the CCI and to provide a "MACD-like" histogram behavior where the midline represents the balance between bullish and bearish momentum.

How can I access this indicator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.