Rounding top setup event

Flags a possible rounding top: the moving average turns down while Bollinger width has been narrowing for a run of bars.

A rounding top is a slow turn-over after a rise, when momentum fades and volatility tightens. This indicator checks two things on each bar: the EMA of close (ma_window, default 50) is lower than on the bar before, and the Bollinger band width (upper minus lower, divided by close, over width_window bars) has narrowed for width_drop_n bars in a row (default 10). The code tests only these two conditions at that moment; it does not check the shape of the top or any earlier rise, and it reads close alone although highs and lows are passed in.

How to read it

Markers sit on the candle where the width squeeze reaches the required run length while the average is falling.
A squeeze longer than width_drop_n bars fires once, on the bar it reaches that length, not on every bar after.
A marker is a setup, not a sell signal: the average has turned down after a squeeze, and price has not yet broken below recent lows.
On the default SPY sample it averaged about six markers per trading day, so judge each marker against the price structure around it.

What it outputs

Rounding top setup: Marks the bar where Bollinger width has narrowed for width_drop_n bars in a row while the EMA of close is falling.

When it fires

Fires on the bar where Bollinger width has narrowed for exactly width_drop_n bars in a row and the EMA of close is lower than on the bar before. Each squeeze fires once, at its n-th bar, so a longer one does not repeat. On the default SPY sample it fired 126 times in one month, about six per day.

Settings

ma_window: Length of the EMA of close (default 50) whose direction is checked. Shorter reacts to small pullbacks, so the average turns down on minor dips; longer turns down only after larger, slower moves.
width_window: Bars in the Bollinger band (default 20) that set band width. Shorter makes width jumpy, so narrowing runs break often and long squeezes are rarer; longer smooths width, so narrowing runs tend to last longer.
width_drop_n: Straight bars of narrowing band width needed before the setup fires (default 10). Lower fires on shorter squeezes and so gives more markers. Higher needs a longer squeeze, so markers are fewer; each squeeze fires once, at that length.

Pitfalls

The shape of the top is not tested: the code does not check for a prior rise, so a falling average inside a downtrend can also fire.
highs and lows are passed in but never read; only close drives the event, so the range is not checked.
This is the setup only. The breakdown event in the same module also needs a close below the lowest low of the prior width_window bars, so the setup alone does not mean a sell-off.