byquan RSI Divergence (OB/OS + RSI MA Base)

byquan RSI Divergence (OB/OS + RSI MA Base)
Description

byquan RSI Divergence is a technical analysis indicator designed to visualize RSI-based divergence patterns within clearly defined overbought and oversold zones, enhanced with an optional RSI moving average baseline.

The script focuses on structural divergence detection rather than signal prediction, providing visual reference points to help users study momentum behavior and price–oscillator relationships.

This indicator is intended for educational and analytical purposes only.

Conceptual Overview

The core idea of this indicator is based on a widely accepted technical principle:

When price structure and momentum structure diverge, market behavior may be transitioning rather than continuing impulsively.

Instead of reacting to every fluctuation, this script identifies well-defined divergence formations that occur:

At RSI pivot points

Within controlled lookback ranges

Inside overbought or oversold zones

Indicator Components
1. RSI Oscillator

The indicator uses a standard Relative Strength Index (RSI):

User-defined period

User-defined source price

RSI values are plotted directly in the pane for transparency and clarity.

2. RSI Base Moving Average

An optional RSI baseline is calculated using a selectable moving average type:

SMA

EMA

RMA

WMA

This baseline is intended to provide additional context for momentum direction and smoothing, not as a signal trigger.

3. Overbought / Oversold Zones

Customizable horizontal levels define:

Overbought conditions

Oversold conditions

Divergences are evaluated only when RSI is located inside the corresponding zone, helping reduce irrelevant signals.

4. Pivot-Based Divergence Detection

The script detects RSI pivot highs and lows using configurable left/right lookback values.

Based on these pivots, it evaluates four divergence types:

Regular Bullish Divergence

Hidden Bullish Divergence

Regular Bearish Divergence

Hidden Bearish Divergence

Each divergence type is plotted independently and can be enabled or disabled by the user.

5. Lookback Range Control

To avoid excessive or outdated comparisons, divergence evaluation is constrained within a user-defined bar range.

This helps ensure that only structurally relevant divergences are displayed.

Visualization

Divergence lines are plotted directly on the RSI pane

Labels are used to distinguish divergence types

Regular and hidden divergences are visually differentiated using color transparency

The indicator prioritizes clarity and interpretability over signal density.

Alert Logic

An alert condition is provided when any divergence type is detected.

Alerts are informational and do not imply direction, timing, or outcome.

Intended Use

This indicator is designed to be used as:

A momentum structure study tool

A visual divergence reference

A supporting component within broader technical analysis

It is not intended to:

Predict market tops or bottoms

Serve as a standalone trading system

Provide financial or investment advice

Technical Notes

The script uses pivot-based confirmation and therefore does not repaint

All calculations are deterministic and rule-based

Divergences are identified only after pivots are confirmed

Results may vary across assets and timeframes

Attribution & Transparency

This script represents a custom implementation and adaptation of commonly documented RSI divergence techniques, including:

Pivot-based divergence logic

Overbought / oversold filtering

RSI smoothing via moving averages

These concepts are widely used in technical analysis.
The specific parameterization, visualization, and filtering structure reflect a personal analytical approach, without claiming exclusivity over the underlying methods.

Disclaimer

This indicator is provided for educational and analytical purposes only.
It does not constitute financial advice, trading recommendations, or performance guarantees.

Past behavior does not imply future results.