Aroon with RSI Confirmation (92.86%)

The Aroon with RSI Confirmation (92.86%) indicator is a trend-analysis tool that identifies high-probability market turning points by combining trend maturity measurements with momentum pressure filters.

Usage

The script is used to identify transitional phases in market behavior where a trend may be nearing exhaustion or a shift in control is occurring. Signals are generated when specific structural and momentum conditions converge:

• Buy Signal: Displayed as a green "BUY" label below the bar. This occurs when the market has recently formed a significant relative low (indicated by the Aroon Down reaching the target level) and buyers begin to regain control as the RSI crosses above its smoothed average while maintaining low volatility.
• Sell Signal: Displayed as a red "SELL" label above the bar. This occurs when the market has recently reached a significant relative high (indicated by the Aroon Up reaching the target level) and sellers begin to dominate as the RSI slips below its smoothed average while momentum is stable.

By monitoring the Max RSI Difference, users can filter out volatile "noise" and focus on signals where the market is in a state of relative stability before a new directional move.

Details

The indicator relies on two primary technical pillars:

1. Aroon Levels (Trend Maturity): The script tracks when the Aroon Up or Aroon Down values reach approximately 92.86%. This specific value statistically represents a phase where price has made an extreme high or low relative to the lookback period, suggesting the trend is at a point of decision.
2. RSI Slope Behavior (Momentum Sentiment): The relationship between the RSI and its Simple Moving Average (SMA) is used to determine control. The script calculates the absolute difference between these two values. A difference below the user-defined threshold indicates market stability or "thinking," while the position of the RSI relative to the SMA indicates whether buyers or sellers are leading the shift.

This dual-layer approach ensures that signals are not just based on price reaching an extreme, but also on the early participation of traders before a broader trend reversal becomes obvious.

Settings

Aroon

• Aroon Length: The lookback period used to calculate the Aroon Up and Aroon Down values (default is 14).
• Aroon 92.86 Tolerance ±: The allowed variance from the target 92.86% level for a signal to be valid.

RSI

• RSI Length: The lookback period for the standard Relative Strength Index calculation.
• Smoothed RSI Length: The period used for the Simple Moving Average (SMA) applied to the RSI.
• Max RSI Difference (pts): The maximum allowed distance between the RSI and its smoothed average. Lower values require more "compressed" or stable momentum before a signal triggers.

FAQ

How do I use the Aroon with RSI Confirmation (92.86%)?

You can use it to identify potential reversals or exhaustion points in a trend. Look for the "BUY" and "SELL" shapes on your chart which indicate that both trend maturity (Aroon) and momentum shifts (RSI) are in alignment.

What does the 92.86% value represent?

In an Aroon calculation with a length of 14, the value of 92.86% indicates that a new high or low was made exactly 1 bar ago. This suggests a very recent extreme that may lead to a shift in market psychology.

How can I access this script?

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