Extreme reversal detector
Long-side reversal score that rises as RSI falls; on this chart it moves almost only with RSI.
The score adds four weighted parts for a bullish reversal: RSI below 0.3 (weight 1.2), a close below the lower band (weight 1.0), a volume ratio above 1.5 (weight 0.8), and a close above the recent low with full weight at 2% above it (weight 0.5). It also computes a bearish score but returns only the bullish one, so short-side reversals never show. The RSI input is basic.RSI, which runs from -1 to +1 around zero, while the 0.3 threshold assumes a 0 to 1 scale, so the RSI part is active on a large share of bars and is not capped.
How to read it
- The line sits in its own pane below the price. As drawn here it never goes below 0.8.
- Each 0.1 of RSI below 0.3 adds 0.4, so a rising line means RSI is falling into a down run.
- The median is about 2.0 and 90% of bars fall between 0.8 and 4.4. Above 4.4 means RSI below about -0.6, a deep one-sided down run.
- A falling line means the down run is easing. A line sitting at 0.8 means RSI is at or above 0.3.
What it outputs
- Bullish reversal score
- Long-side reversal score, floored at 0. As drawn here it equals 0.8 + 4 * (0.3 - RSI) when RSI is below 0.3, and 0.8 otherwise. It never fell below 0.8 in the SPY sample.
Pitfalls
- The 0.3 oversold threshold assumes a 0 to 1 RSI, but basic.RSI runs -1 to +1. The term has no cap, so the line reaches 6.0 at RSI -1 and sits high on many bars.
- Here the lows, bands and volume inputs all read the close price: band and bounce terms stay at zero, the volume term sits at its 0.8 cap, and only RSI moves the line.
- The docstring's 0 to 3 scale and its 2.0 and 2.5 cut-offs do not match the sample, which runs 0.8 to 6.0. The bounce term rewards distance above the recent low, not nearness to it.