Bollinger Band Squeeze with RSI Divergence

• 03/12/2017 at 7:09 PM #28333
  sincitytrader

  Hi

  I am looking for some assistance on creating a high ‘A quality’ setup for proscreener  to do the following Bollinger Band squeeze with RSI divergence trades.

  See the video here after the 6 minute marker, which explains the trading strategy. https://www.youtube.com/watch?v=7PY4XxQWVfM&list=TLUTNeV0_uFOc

  I have created some code (far from perfect) to detect the boll squeeze and a trigger bar outside the upper bollinger (see below),  but need RSI divergence detected which is inline with the relevant candles for the swing pivot ighs.  So for example, when price makes a higher high, and RSI makes a lower high, go short.

  I have looked at the platform RSI divergence indicators and also the RSX indicator Nicholas created here (https://www.prorealcode.com/prorealtime-indicators/divergences-rsx/),, but the coding is beyond my knowledge.

  Anyone up for a challenge.

  Thanks

  Rob

  // This detects before a potential breakout or breakdown with RSI divergence // Bollinger band squeeze increases the quality of breakout trade // Go Long // stocks higher than $10 c1 = close > 10 // average volume higher than 10k c2 = volume > 10000 // identify upward trend price above 20MA c3 = average[20](close[2]) > average[20](close[12]) // recent average bollinger bandwidth must be squeezed recentboll = average[10](bollingerbandwidth[20](close[2])) pastbollbandwidth = average[20](bollingerbandwidth[20](close[2])) - recentboll c4 = (recentboll < pastbollbandwidth) // over sold trigger bar moving outside upper bollinger band c5 = high[3] > BollingerUp[20][3] c6 = open[3] < BollingerUp[20][3] screener [c1 and c2 and c3 and c4 and c5 and c6 ]

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  // This detects before a potential breakout or breakdown with RSI divergence // Bollinger band squeeze increases the quality of breakout trade // Go Long   // stocks higher than $10 c1 = close > 10   // average volume higher than 10k c2 = volume > 10000   // identify upward trend price above 20MA c3 = average[20](close[2]) > average[20](close[12])   // recent average bollinger bandwidth must be squeezed recentboll = average[10](bollingerbandwidth[20](close[2])) pastbollbandwidth = average[20](bollingerbandwidth[20](close[2])) - recentboll   c4 = (recentboll < pastbollbandwidth)     // over sold trigger bar moving outside upper bollinger band c5 = high[3] > BollingerUp[20][3] c6 = open[3] < BollingerUp[20][3]   screener [c1 and c2 and c3 and c4 and c5 and c6 ]

   

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  sincitytrader

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  03/13/2017 at 11:09 AM #28377
  Nicolas

  Interesting strategy because it has sense.  The problem here is that you need 3 conditions that could not appear all at the same time:

  • piercing of the bollinger bands
  • a BB squeeze
  • an RSI divergence

  So to give an effective signal that compile all of these informations, we must define first a “lookback window” for these conditions to be true within these periods.

  How much bars in the past from the current candlestick do you want to go back in the past to find if these conditions were fulfilled?

  

  Nicolas

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  03/13/2017 at 11:29 AM #28380
  sincitytrader

  Hi Nicolas,

  Thanks for your fast response.

  For daily timeframe,  the bollinger band squeeze would need to be decreasing over say, 12-15 bars.  Within this band, would need to see the 2 swing highs with the higher high.   And inline with the 2 highs of the candles that are touching or piercing the upper bollinger, to compare the RSI values at this point.  The 2nd candle to pierce the upper bollinger and see a quick rejection would be preferable,  but not absolutely necessary, so an OR maybe good here.

  Entry would be on price action and a close of a bar closing lower than the previous 2-3 bars or even a doji.

  This could be used on the 4 hourly and 1 hourly time frame.  May need to configure the look back periods for the boll band squeeze.

  Many thanks

  Rob

   

  

  sincitytrader

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  03/13/2017 at 3:27 PM #28411
  Nicolas

  This is the code for a complete screener that catch these conditions, from my own view. Only the bearish trades opportunity is coded. You need to test it by yourself! I modified the squeeze condition with a Bollinger Bands contained into a keltner channel instead.

  // stocks higher than $10 c1 = close > 10 // average volume higher than 10k c2 = volume > 10000 // identify upward trend price above 20MA c3 = average[20](close[2]) > average[20](close[12]) // recent average bollinger bandwidth must be squeezed UpperKC = average [20](close) + 1.5*averagetruerange[20](close) LowerKC = average [20](close) - 1.5*averagetruerange[20](close) c4 = summation[3](BollingerUp[20](close) < UpperKC and bollingerdown[20](close) > LowerKC)=3 // over sold trigger bar moving outside upper bollinger band c5 = summation[3](high crosses over bollingerup[20])>0 //RSI divergences screener //--- parameters period = 14 //RSI period overbought = 70 //overbought RSI level //------------------- myRSI = RSI[period] y=average[2](myRSI) // ---- if intradaybarindex=0 then res=0 endif if myRSI>overbought then hi=max(hi,myRSI) hico=max(hico,max(high,high[1])) endif if myRSI crosses under y then rsi2b=rsi1b rsi1b=hi hi=0 p3b=p1b p2b=max(p1b,hico1) p1b=max(highest[3](high),hico) if p2b=p1b then p2b=max(p3b,p4b) endif hico=0 hico1=0 endif if myRSI<y then p4b=hico1 hico1=max(hico1,high) endif divBaissiere= p1b>p2b and rsi1b<rsi2b and myRSI crosses under y and myRSI<myRSI[1] if divBaissiere then res=1 endif c6 = summation[12](res)>0 screener [c1 and c2 and c3 and c4 and c5 and c6]

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  // stocks higher than $10 c1 = close > 10   // average volume higher than 10k c2 = volume > 10000   // identify upward trend price above 20MA c3 = average[20](close[2]) > average[20](close[12])   // recent average bollinger bandwidth must be squeezed UpperKC = average [20](close) + 1.5*averagetruerange[20](close) LowerKC = average [20](close) - 1.5*averagetruerange[20](close)   c4 = summation[3](BollingerUp[20](close) < UpperKC and bollingerdown[20](close) > LowerKC)=3   // over sold trigger bar moving outside upper bollinger band c5 = summation[3](high crosses over bollingerup[20])>0   //RSI divergences screener //--- parameters period = 14 //RSI period overbought = 70 //overbought RSI level   //------------------- myRSI = RSI[period] y=average[2](myRSI) // ---- if intradaybarindex=0 then res=0 endif if myRSI>overbought then hi=max(hi,myRSI) hico=max(hico,max(high,high[1])) endif if myRSI crosses under y then rsi2b=rsi1b rsi1b=hi hi=0 p3b=p1b p2b=max(p1b,hico1) p1b=max(highest[3](high),hico) if p2b=p1b then p2b=max(p3b,p4b) endif hico=0 hico1=0 endif if myRSI<y then p4b=hico1 hico1=max(hico1,high) endif divBaissiere= p1b>p2b and rsi1b<rsi2b and myRSI crosses under y and myRSI<myRSI[1]   if divBaissiere then res=1 endif   c6 = summation[12](res)>0   screener [c1 and c2 and c3 and c4 and c5 and c6]

   

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  Nicolas

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