RSI Overbought/Oversold + Divergence Indicator

The RSI Overbought/Oversold + Divergence Indicator tool provides a comprehensive oscillator suite combining the Relative Strength Index (RSI), customizable Moving Averages, and automated divergence detection to assist in identifying trend reversals and momentum shifts.

Usage

The Usage section describes how the script can be used to identify market entries and exits through multiple technical signals.

• Momentum Bias: The RSI line changes color based on its position relative to its Moving Average (MA). When the RSI is above the MA, it turns green, indicating bullish momentum. When below, it turns red, indicating bearish momentum.
• Overbought/Oversold Identification: The indicator plots specific threshold lines (default 70/30 and extended 80/20). Areas where the RSI enters these extremes are highlighted to signal potential exhaustion.
• Divergence Signals: The tool automatically identifies Regular and Hidden Divergences. Signals appearing within overbought or oversold zones are generally considered to have higher technical weight.
• Trend Following: Users can utilize the RSI-MA cloud to visualize the gap between price momentum and its average, helping to stay on the right side of a trend during Elliot Wave cycles or Fibonacci retracements.

Details

This indicator calculates the RSI based on a user-defined source and length, then applies a secondary Moving Average (selectable from SMA, EMA, WMA, VWMA, etc.) to the RSI result itself rather than price. This "RSI of RSI" approach smooths out volatility and provides a clearer signal for momentum crossovers. The divergence logic looks back over a specific pivot range to compare price action peaks and valleys against the oscillator's peaks and valleys.

Settings

Show/Hide Settings

• Show RSI: Toggles the visibility of the main RSI line.
• Show MA: Toggles the visibility of the RSI's Moving Average.
• Show RSIMA Cloud: Displays a shaded area between the RSI and its MA.
• Show Oversold/Overbought Lines: Toggles standard threshold levels.
• Show RSI Divergence Labels: Enables or disables the automated bullish/bearish divergence labels.

RSI Table Settings

• Show RSI Table Information box: Displays a multi-timeframe dashboard on the chart.
• Location/Size: Adjusts the dashboard's position and font size.
• Show TimeFrame 1-4: Select which specific intervals to track in the table.

RSI & MA Settings

• RSI Length: The lookback period for the RSI calculation.
• Overbought/Oversold Extended: Customizable levels for extreme market conditions.
• MA Type/Length: Defines the smoothing method and period for the RSI's Moving Average.

RSI Divergence Settings

• Pivot Lookback Right/Left: Adjusts the sensitivity for detecting pivot points used in divergence.
• Plot Bullish/Bearish: Toggles specific types of regular and hidden divergences.

FAQ

How do I interpret the RSI color changes? The RSI line turns green when it is above its moving average (bullish) and red when it is below (bearish).

What is the "Extended" Overbought/Oversold line? These are secondary levels (e.g., 80 and 20) used to identify deep market extremes beyond the standard 70/30 thresholds.

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