RSI with Divergences, Reverse Formulas, and Bull/Bear Zones

The RSI with Divergences, Reverse Formulas, and Bull/Bear Zones indicator provides a comprehensive relative strength analysis tool that combines standard momentum tracking with automated divergence detection and price-level forecasting. By utilizing reverse RSI formulas, the script calculates and displays the exact price required for the RSI to reach specific bullish or bearish threshold levels, offering actionable insights for breakout and selloff scenarios.

Usage

The script is primarily used to identify momentum shifts and trend transitions through visual zones and price labels.

• Bull/Bear Zones: The background changes color based on user-defined RSI thresholds. A "Bullish" state is triggered when the RSI crosses above the Bull Threshold, and a "Bearish" state is triggered when it falls below the Bear Threshold. These zones help identify potential breakout points and areas of market exhaustion.
• Divergence Detection: The tool highlights four types of divergences (Regular Bullish, Regular Bearish, Hidden Bullish, and Hidden Bearish) directly on the RSI line. These signals indicate potential reversals or trend continuations where price action and momentum disagree.
• Price Forecast Labels: A table displays the specific price values needed for the current candle to reach the input Bull and Bear thresholds, allowing traders to set anticipatory orders or price alerts.
• Moving Average Integration: Users can overlay various MA types (SMA, EMA, Bollinger Bands, etc.) on the RSI to smooth the momentum data and identify secondary trend signals.

Details

The core of this indicator relies on a reverse calculation of the Relative Strength Index. While standard RSI measures the ratio of upward price changes to downward price changes, the reverse formula solves for the price variable required to achieve a target RSI value. This bridge between oscillator space and price space removes the "guessing game" of where a momentum shift might occur on the chart.

The divergence logic looks for pivot points within a specific lookback range (default 5 bars) to compare price highs/lows with oscillator highs/lows. Regular divergences suggest reversals, while hidden divergences suggest trend continuation.

Settings

RSI Settings

• RSI On: Toggles the visibility of the main RSI line.
• RSI Length: Sets the lookback period for the RSI calculation.
• Source: Determines the price data used (Close, Open, High, Low, etc.).
• Overbought/Oversold Lines: Sets the horizontal reference levels (default 70/30).

MA Settings

• MA On: Toggles the RSI-based moving average.
• MA Type: Selection between SMA, Bollinger Bands, EMA, SMMA, WMA, or VWMA.
• MA Length: Sets the lookback period for the smoothing line.

Zones

• Zones On: Toggles the background coloring between thresholds.
• Bull Threshold: The RSI level that triggers a bullish zone transition.
• Bear Threshold: The RSI level that triggers a bearish zone transition.

Toggle Divergence Plotting

• Plot Bullish/Bearish: Toggles regular divergence signals.
• Plot Hidden Bullish/Bearish: Toggles hidden divergence signals.

Labels

• Label On: Toggles the price forecast table.
• Decimals: Sets the rounding precision for the forecast prices.

FAQ

How do I use the price forecast labels?

The labels show the exact price level your asset needs to hit for the RSI to reach your defined Bull or Bear thresholds. You can use these levels to set limit orders or stop-losses at key momentum transition points.

What is the difference between the Bull/Bear thresholds and Overbought/Oversold?

Overbought/Oversold (70/30) levels typically indicate extreme momentum, while Bull/Bear thresholds (e.g., 60/35) are used to define the broader trend regime or "zones" where the price is expected to maintain strength or weakness.

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.