Divergences (RSI)

The Divergences (RSI) indicator identifies both regular and hidden divergences between price action and the Relative Strength Index (RSI) directly on the price chart. This tool helps traders spot potential trend reversals and continuations by analyzing the relationship between price pivots and RSI momentum.

Usage

The Usage section focuses on identifying market shifts through divergence patterns. When price makes a lower low but the RSI makes a higher low, a bullish divergence is identified, suggesting a potential upward reversal. Conversely, a bearish divergence occurs when price makes a higher high while the RSI makes a lower high.

The indicator also tracks hidden divergences:

• Hidden Bullish: Price makes a higher low, but RSI makes a lower low, often signaling trend continuation.
• Hidden Bearish: Price makes a lower high, but RSI makes a higher high.

Users can adjust the "Margin" setting to filter the sensitivity of these detections, allowing for stricter or more relaxed pivot comparisons based on Fibonacci-based thresholds.

Details

The script utilizes pivot high and pivot low logic applied to both candlesticks and the RSI values. It specifically looks at "nwh" (new high) and "nwl" (new low) conditions based on whether a candle is bullish or bearish to refine the anchor points for divergence lines. Unlike standard pivot-based divergence scripts, this implementation provides deep lookback capabilities, checking across multiple historical pivots (up to 8 previous points) to find valid divergence lines.

Settings

Main Settings

• Length RSI: Sets the lookback period for the RSI calculation.
• Source RSI: Determines the price source (e.g., close, open, hl2) used for RSI.
• Show Pivot High & Lows: Toggles the visibility of the price pivot points.
• Show Regular Divergences: Enables or disables the plotting of regular reversal divergences.
• Show Hidden Divergences: Enables or disables the plotting of hidden continuation divergences.

Visuals & Lookback

• Div Line linewidth: Adjusts the thickness of the divergence lines drawn on the chart.
• Lookback Div Lines (Short/Long/Very Long): Controls the historical depth for drawing different lengths of divergence lines.
• LeftBars / RightBars: Defines the number of bars required on each side to confirm a pivot point.
• Margin: A multiplier used to filter the significance of the price moves between pivots.

FAQ

How do I interpret the divergence lines?

Regular divergence lines often indicate a potential trend reversal, while hidden divergence lines typically suggest that the current trend is likely to continue after a brief pullback.

How does the Margin setting affect the results?

The Margin setting acts as a filter; higher margin values require more significant price differences between pivots to trigger a divergence, helping to reduce noise in volatile markets.

How can I access Divergences (RSI)?

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