K's Reversal Indicator II

The K's Reversal Indicator II indicator is a mean-reversion tool designed to identify short-term to mid-term price reversals by tracking the relationship between price action and a moving average over a specific lookback period.

Usage

The indicator provides visual signals on the chart to highlight potential exhaustion points in a trend:

• Bullish Reversal: A green triangle appears below the bar when the price has consistently stayed below its moving average for 21 consecutive periods, suggesting an oversold condition and a potential move back toward the mean.
• Bearish Reversal: A red triangle appears above the bar when the price has stayed above its moving average for 21 consecutive periods, suggesting an overbought condition and a potential corrective move.

Traders can use these signals to anticipate trend shifts or to time entries in the direction of the mean.

Details

The script utilizes a moving average timing technique. It evaluates a fixed lookback window of 21 bars. For each bar in this window, it checks if the closing price is higher than the Simple Moving Average (SMA).

• If the count of "price > SMA" instances reaches 21 (meaning the market has been above the average for the entire window), a bearish signal is triggered once the condition is met and was not present on the previous bar.
• If the count is 0 (meaning the market has been below the average for the entire window), a bullish signal is triggered.

This binary state tracking effectively measures extreme persistence in one direction, which often precedes a reversal in mean-reverting markets.

Settings

• Moving Average Length: Determines the period used for the underlying Simple Moving Average calculation (default is 13). Adjusting this value changes the sensitivity of the trend detection.

FAQ

How do I interpret the signals?

A bullish signal (upward triangle) suggests the price may rise back toward the average, while a bearish signal (downward triangle) suggests the price may fall toward the average.

Can I use different Moving Average types?

The current version uses a Simple Moving Average (SMA) as the baseline for the calculation, which is the standard for this specific timing technique.

How can I access K's Reversal Indicator II?

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