PivotBoss Outside Reversal Setup

The PivotBoss Outside Reversal Setup indicator identifies high-probability engulfing patterns where price action tests and rejects levels beyond the previous bar's range before reversing sharply. This tool helps traders pinpoint potential springboards in price action by highlighting bars that exceed a specific volatility threshold while completely engulfing the prior candle's high and low.

Usage

The Usage section describes how the script can be used to identify trend reversals or responsive buying/selling at extremes.

• Bullish Reversal: Look for a label below the bar. This occurs when the current bar's low is lower than the previous bar's low (testing support) but closes above the previous bar's high. This suggests a "springboard" effect where selling pressure was exhausted, leading to a flood of buying.
• Bearish Reversal: Look for a label above the bar. This occurs when the current bar's high is higher than the previous bar's high (testing resistance) but closes below the previous bar's low. This suggests that buyers failed to maintain momentum at higher prices, leading to a sharp reversal.
• Volatility Filter: The indicator requires the engulfing bar to be larger than a percentage of the average range (ATR) over a lookback period. This ensures the setup has sufficient momentum and isn't just noise in a low-volatility environment.

Details

The PivotBoss Outside Reversal Setup is built on the concept of candlestick reduction. When you combine the two bars of an outside reversal into a single composite candle (taking the open of the first bar and the close of the second), the resulting shape is often a long-wick reversal candle.

The psychology behind this pattern involves "testing the waters." Market participants push price past previous boundaries to see if new business (initiative buying or selling) will follow. When no new participants join the move, responsive traders quickly reverse the price back toward the previous area of perceived value, trapping breakout traders in the process.

Settings

• Lookback Period: Defines the number of bars used to calculate the Average True Range (ATR). This value is used to determine the "typical" bar size for the volatility filter.
• Bar ATR Multiplier: Adjusts the required size of the signal bar. For example, a setting of 1.05 means the engulfing bar must be at least 5% larger than the average bar in the lookback period to be considered valid.

FAQ

How do I access the PivotBoss Outside Reversal Setup?

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

What does "OR" stand for on the chart labels?

"OR" stands for Outside Reversal, indicating that a valid bullish or bearish outside reversal setup has been detected based on the price action and volatility criteria.

Can I use this on any timeframe?

Yes, the logic of testing extremes and reversing is universal across timeframes, though it is commonly used on daily or intraday charts to identify significant turning points.