TASC 2022.12 Short-Term Continuation And Reversal Signals

The TASC 2022.12 Short-Term Continuation And Reversal Signals indicator provides a comprehensive visual framework for identifying trend shifts and momentum pullbacks by combining the Commodity Channel Index (CCI) and a modified Directional Movement Indicator (DMI) oscillator.

Usage

This tool is designed to highlight three specific market conditions:

• Short-Term Trend Changes: The DMI oscillator (calculated as +DI minus -DI) determines the trend direction. When the histogram is green and above zero, the short-term trend is bullish. When it is red and below zero, the trend is bearish. This logic is also applied to the chart's bar colors for easier trend recognition.
• Trend Continuation: These signals identify potential entries within an established trend. A bullish continuation (green circle) appears when the DMI is positive, the price is above its 18-period SMA, and the low is rising. A bearish continuation (red circle) appears when the DMI is negative, the price is below its SMA, and the high is falling.
• Reversal Signals: Based on the CCI, these signals identify overextended conditions. A reversal to the downside (red diamond) is triggered when the CCI crosses back below the +100 level after being above it. A reversal to the upside (green diamond) is triggered when the CCI crosses back above the -100 level.

The script supports four display modes:

1. DMI: Shows only the DMI histogram and its associated signals.
2. CCI: Shows only the CCI line and reversal signals.
3. Dual: Displays both the DMI and CCI together in a single oscillator pane.
4. Overlay: Moves the continuation and reversal signals directly onto the price chart while hiding the oscillator pane.

Details

The indicator is based on the article "Short-Term Continuation And Reversal Signals" by Barbara Star in the December 2022 edition of Technical Analysis of Stocks & Commodities (TASC). It converts the DMI into a centralized oscillator to filter out "market noise" and uses moving average filters to ensure continuation signals align with the broader price action. The inclusion of the CCI provides a counter-trend or swing-trading component, allowing users to spot exhausted trends or local tops and bottoms.

Settings

Input Options

• Oscillator Mode: Switches between DMI, CCI, Dual (both), or Overlay (on-chart signals).
• DMI Multiplier: Adjusts the visual height of the DMI histogram to better match the CCI scale.
• DMI Length: The lookback period for the Directional Movement Indicator.
• MA Length: The period for the Simple Moving Average used to filter trend continuation signals.
• CCI Length: The lookback period for the Commodity Channel Index.

Style Options

• DMI Colors: Customizes the colors for bullish and bearish DMI readings.
• Continuity Signals: Customizes the shape and color of the trend continuation icons.
• CCI Signals: Customizes the shape and color of the CCI reversal icons.

FAQ

How can I use this for swing trading?

By looking for the interplay between signals; for example, entering on a "yellow diamond" (CCI reversal up) and adding to the position when a "blue circle" (Trend continuation) appears.

What do the colored bars represent?

The bar colors are linked to the DMI oscillator. Green bars indicate bullish momentum (+DI > -DI), while red bars indicate bearish momentum (-DI > +DI).

How do I access this indicator?

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