OPEN-SOURCE SCRIPT

Wedge Breakout

Actualizado
The Wedge Breakout indicator is designed to identify and signal potential breakouts from a wedge pattern, a common technical analysis formation. A wedge pattern typically forms when the price moves within converging trendlines, indicating a potential upcoming breakout either upwards (bullish) or downwards (bearish).

Identifying Pivot Points:
  • The indicator first calculates pivot points, which are significant highs and lows that define the wedge's upper and lower boundaries.
  • Pivot Lows: It identifies the lowest price points over a specified length (input_len), which serves as the lower boundary of the wedge.
  • Pivot Highs: Similarly, it identifies the highest price points over the same length, forming the upper boundary of the wedge.

Drawing Trendlines:
  • The pivot points are connected to form dashed trendlines that represent the upper and lower boundaries of the wedge.
  • The indicator uses the SimpleTrendlines library to manage and draw these trendlines dynamically:
  • Green Trendline: Indicates an upward slope (bullish).
  • Red Trendline: Indicates a downward slope (bearish).


Calculating the Breakout Conditions:
  • A breakout is confirmed when the price action fulfills two conditions:
  • The candle's high exceeds the upper trendline's highest point.
  • The candle's low drops below the lower trendline's lowest point.
  • This condition suggests that the price is squeezing within the wedge pattern and is about to break out.


Determining Breakout Direction:

  • The direction of the breakout is determined by the candle's closing position relative to its opening:
  • Bullish Breakout (Upward): When the candle closes above its opening price (close > open) after breaching both trendlines, it suggests a bullish breakout. This condition is marked with a green upward triangle .
  • Bearish Breakout (Downward): When the candle closes below its opening price (close < open) after breaching both trendlines, it suggests a bearish breakout. This condition is marked with a red downward triangle.

Visual Representation:
  • Green Triangle Up: Plotted below the bar to indicate a potential bullish breakout.
  • Red Triangle Down: Plotted above the bar to indicate a potential bearish breakout.

Used library:
Simple Trendlines
Notas de prensa
fixed intersection rule
Notas de prensa
fixed calculation by past intersections
Notas de prensa
improved direction mechanism with:
KAMA Cloud
Bands and ChannelsPivot points and levelsTrend Analysis

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