Pekipek's PPO Divergence BETA

The Pekipek's PPO Divergence BETA indicator identifies potential trend reversals by detecting bullish and bearish divergences between price action and the Price Percentage Oscillator (PPO). It offers a flexible framework for analyzing both short-term momentum shifts and long-term structural changes through its adjustable lookback and smoothing parameters.

Usage

The Usage section describes how the script can be used to identify market imbalances. Users can look for the following signals:

• Bullish Divergence: Indicated by green circles on the oscillator line. This occurs when the price records lower lows while the PPO records higher lows, suggesting a waning in downward momentum.
• Bearish Divergence: Indicated by red circles on the oscillator line. This occurs when the price records higher highs while the PPO records lower highs, suggesting a exhaustion in upward momentum.
• Long-Term Divergences: By enabling the "Long term Divergences" setting, the script filters for significant structural divergences over a broader time horizon, which can be useful for identifying major cycle tops or bottoms.

The indicator is displayed in a separate pane. It plots a smoothed PPO line and highlights specific "pivot points" (tops and bottoms) where the divergence logic is calculated.

Details

The script calculates the PPO by taking the difference between two Exponential Moving Averages (EMAs) and expressing it as a percentage of the slower EMA. This normalized approach allows for easier comparison across different asset price levels.

A unique aspect of this tool is its multi-layered detection logic. It identifies divergences using several methods:

1. Standard Divergence: Compares the two most recent oscillator peaks/troughs against the corresponding price peaks/troughs.
2. Delayed Divergence: Accounts for instances where the oscillator reaches a pivot slightly before or after the price, ensuring signals are captured even when the timing is not perfectly synchronous.
3. Filtered Lookbacks: The script uses a lookback period to determine if a current high or low is significant relative to recent history.

Users should be aware that because the lookback for the lowest/highest functions is fixed per setting, the indicator may occasionally plot signals in consolidated zones. The "Beta" status reflects the inherent complexity of mapping price peaks to oscillator peaks without isolated line drawing.

Settings

• Use long term Divergences?: Toggles the detection of broader, structural divergences based on the Lookback Period.
• Lookback Period: Defines the number of bars used to determine the significance of price and oscillator extremes for long-term signals.
• Fast Length: The period for the shorter EMA used in the PPO calculation (default is 12).
• Slow Length: The period for the longer EMA used in the PPO calculation (default is 26).
• Signal Length: The period used for the internal signal line (though primarily used here for smoothing calculations).
• Smoother: The SMA period applied to the PPO to reduce noise and provide a cleaner oscillator line.

FAQ

How do I interpret the green and red circles? The green circles represent bullish divergence points (potential buy zones), while red circles represent bearish divergence points (potential sell zones). Circles plotted directly on the oscillator line indicate the specific bar where the divergence criteria were met.

Can I use this for assets other than stocks? Yes, since the PPO is a percentage-based oscillator, it is effective on any liquid asset class including Forex, Crypto, and Commodities, as it normalizes the momentum regardless of the nominal price.

How can I access Pekipek's PPO Divergence BETA? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.