Exceptional Volume Spike - Potential Trend Reversal Indicator

What the Script Does:

The indicator aims to identify potential trend reversal points using the following steps:

Input Parameters: The script has three main input parameters that you can adjust:
relative_volume_threshold: This parameter sets the threshold for what is considered an exceptional volume spike in relation to the average volume.
ema_length: The length of the exponential moving average (EMA) used for smoothing calculations.
lookback_period: The period over which the script calculates potential support and resistance levels.

Relative Volume Calculation: The script calculates the relative volume by dividing the current volume by the average volume over the specified lookback_period.

Exceptional Volume Spikes: The script identifies exceptional volume spikes when the calculated relative volume exceeds the specified relative_volume_threshold.

EMA of Exceptional Volume Spikes: The script calculates the exponential moving average (EMA) of volume spikes. This EMA smooths out the volume spikes over the chosen ema_length.

Trend Direction: The script determines the trend direction using the crossovers of the EMA of exceptional volume spikes. If the EMA crosses above the EMA of regular volume (not spikes), it suggests a potential upward trend reversal. Conversely, if the EMA crosses below, it suggests a potential downward trend reversal.

Support and Resistance Levels: The script calculates potential support and resistance levels based on the highest high (hh) and lowest low (ll) over the specified lookback_period. These levels are then plotted on the chart.

Plot Shapes and EMA: The script plots triangle shapes below the bars for potential upward reversals and above the bars for potential downward reversals. Additionally, it plots the EMA of the closing price with different colors based on the trend direction.

By using this script as an indicator on your chart, you can visually assess potential trend reversal points based on exceptional volume spikes, trend direction crossovers, and support/resistance levels. Remember that this script serves as a tool to assist your analysis, and it's important to combine it with other technical analysis tools and strategies before making trading decisions.
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