Multi Divergence Overlay +

The Multi Divergence Overlay + indicator is a comprehensive technical analysis tool that identifies and overlays divergence signals from multiple momentum sources directly onto the price chart. It provides traders with a unified view of trend exhaustion and reversal potential by consolidating signals from RSI, Stochastics, Knoxville Divergence, and custom external sources.

Usage

The script is designed to act as a confluence engine for identifying market reversals. It monitors multiple oscillators simultaneously and plots divergence lines and labels when price action disagrees with momentum.

• Divergence Sources: Users can toggle regular and hidden divergences for a smoothed RSI, an RSI Signal Line, two separate Stochastics (Longer and Shorter), and a custom "Other Indicator" source.
• Knoxville Divergence: Identifies specific reversal setups based on the Knoxville method, which utilizes a combination of RSI, Momentum, and price action fractals.
• Exhaustion Pivots: Visualizes high and low exhaustion points using circle plots to highlight potential local tops and bottoms.
• Reversal Tabs: Based on Bob Rooker's logic, these shapes appear when a MACD crossover coincides with extreme Stochastic RSI levels, signaling a high-probability trend shift.
• Multi-Timeframe (MTF) Highlights: The background changes color when RSI values across five different timeframes (15m, 1h, 4h, Daily, Weekly) align in overbought or oversold conditions.

Details

The indicator utilizes a fractal-based approach to identify peaks and troughs in both price and the selected momentum oscillators. By comparing the relative heights of these fractals, the script determines if a Regular Divergence (potential reversal) or Hidden Divergence (potential trend continuation) has occurred.

The "Plus" features add extra layers of confirmation:

• Signal Line Divergence: Uses a Linear Regression or EMA/SMA smoothed signal line of the RSI to find more sensitive divergence signals.
• Knoxville Logic: Specifically looks for scenarios where momentum is failing while RSI is in extreme territory, filtered by price fractals.

Settings

General Settings

• Show Exhaustion Pivots: Toggles the display of exhaustion high/low circles.
• Exhaustion Length: Adjusts the lookback period for calculating exhaustion pivots.
• 5 Timeframe OB OS Highlights: Enables background coloring based on MTF RSI alignment.
• Reversal Tabs: Enables/disables the Bob Rooker reversal shapes and allows configuration of the MACD parameters used for this logic.

Divergence Configuration

• Divergences Offset: Shifts the plots to the earliest possible entry point or keeps them at the fractal confirmation point.
• Knoxville Divergences: Settings to toggle Knoxville-specific lines, labels, and triangles, as well as the RSI and Momentum lengths.
• Other Indicator Source: Allows the user to select any other plot on their chart as a source for divergence detection.
• RSI / Stochastic Settings: Individual groups for RSI smoothing, Signal Line types (SMA, EMA, LinReg), and Stochastic periods (K and Smoothing).

FAQ

How do I interpret the different labels?

The labels are color-coded and named based on their source (e.g., "Knox" for Knoxville). Generally, green labels or upward triangles below the bars indicate bullish divergence, while red/orange labels or downward triangles above the bars indicate bearish divergence.

What is the difference between Regular and Hidden Divergence?

Regular divergence suggests a potential trend reversal, while hidden divergence typically suggests that the current trend is likely to continue. Both can be toggled independently for most sources in the settings.

How can I access Multi Divergence Overlay +?

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