Momentum Saturation Zones

The Momentum Saturation Zones indicator is an open-source tool designed to detect momentum extremes and mark the resulting price structural imprints as actionable support and resistance zones. By identifying where momentum peaks or troughs before a significant pullback, the script provides traders with reference areas where the market has previously demonstrated strong conviction.

Usage

The indicator detects "saturation" when a momentum signal reaches an extreme and then pulls back beyond an adaptive threshold. Once triggered, it anchors a zone to the high (for resistance) or low (for support) of the candle where the momentum extreme occurred.

Key Usage Scenarios:

• Zone Strength: Each zone is assigned a composite score from 0-100 based on momentum extremity, pullback magnitude, volume, and divergence. Higher scores indicate zones with greater confluence.
• Touch Counting: The script tracks how many times price returns to a zone. A zone that holds after multiple touches suggests strength, while a zone with a high touch count may eventually become exhausted and lead to a breakout.
• Adaptive Volatility: The pullback trigger automatically scales based on the current ATR relative to its long-term average, requiring larger pullbacks in volatile markets and smaller ones in quiet regimes.
• Visual Context: Candles are tinted when price enters or approaches within 0.5 ATR of a valid zone, serving as a passive alert for potential reactions.

Details

The script differentiates itself from standard overbought/oversold oscillators by using a composite scoring mechanism for zone creation. A zone is only plotted if it meets a configurable minimum score.

Zone Anchoring Logic:

• Resistance (Bear): Anchored at the candle high of the peak momentum bar, extending upward by a user-defined ATR multiple.
• Support (Bull): Anchored at the candle low of the trough momentum bar, extending downward.

The indicator also includes "Proximity Deduplication," which prevents the stacking of multiple zones at the same price level if they are within 1.5 ATR of an existing active zone. When price closes beyond the zone (plus a small invalidation offset), the zone is removed to keep the chart clean.

Settings

Momentum Configuration

• Momentum Source: Choose between RSI, Rate of Change (ROC), Money Flow Index (MFI), Stochastic RSI, or a Composite average of all four.
• Momentum Length: The lookback period for all momentum calculations.
• Peak Lookback Bars: The rolling window used to detect local momentum peaks and troughs.

Saturation Trigger

• Adaptive ATR Threshold: When enabled, the pullback requirement scales with market volatility.
• Pullback % from Peak: The percentage the momentum signal must drop from its peak to trigger a zone.
• RSI Overbought/Oversold: Defines the absolute levels required for a momentum extreme if the "Require Absolute Extreme" gate is active.
• Cooldown Bars: Sets the minimum time between the creation of new zones.

Quality Filters

• Volume Filter at Peak: Requires the volume at the momentum extreme bar to be above a specific multiplier of the average volume.
• Divergence Bonus Score: Adds 20 points to the zone strength score if a momentum divergence is detected.
• Min Strength Score: The minimum composite score (0-100) required to plot a zone.

Zone Settings

• Max Active Zones: Limits the number of simultaneous zones displayed on the chart.
• ATR Length: The period used for calculating ATR-based zone heights.
• Zone Width (x ATR): The vertical height of the zone expressed as a multiple of ATR.
• Invalidation Offset %: The percentage margin beyond the zone edge that price must close past to invalidate and delete the zone.

FAQ

How do I access the Momentum Saturation Zones indicator? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

Why does a zone sometimes disappear? Zones are automatically deleted when price closes beyond the invalidation offset. This ensures that only structurally valid levels remain on your chart.

What does the "Composite" momentum source do? The Composite mode averages the RSI, normalized ROC, MFI, and StochRSI. This helps filter out noise from any single indicator while capturing the collective momentum of multiple calculation methods.