High-Volume RSI Reversals with Prior-Bar Confirmation and VWAP Exits
Summary
This model looks for high-volume exhaustion moves followed by a price confirmation. For a long, RSI must be below its lower threshold while volume exceeds 1.5 times its moving average, and the close must then exceed the prior bar’s high. The short setup mirrors this logic: RSI above its upper threshold, elevated volume, and a close below the prior low. The script sets the initial long stop at the signal bar’s low and the short stop at its high. It exits a long when price reaches or exceeds VWAP, or closes below its stop; the short exits at VWAP or above its stop.
The source sets RSI length to 14, thresholds to 25 and 75, and volume-average length to 20, but provides no backtest results or market-specific evidence. Although titled for high-beta assets, it does not define an asset universe or beta screen. It also calculates a position size but leaves commissions, slippage, and broader portfolio risk assumptions unspecified. The approach is a rule set to investigate, not demonstrated evidence of profitable reversal behavior.
Key ideas
- Long entries require oversold RSI, unusually high volume, and a close above the previous high.
- Short entries require overbought RSI, unusually high volume, and a close below the previous low.
- Initial stops use the signal bar’s low for longs and high for shorts.
- VWAP serves as the target for both long and short positions.
- The document gives no backtest evidence or defined universe for its high-beta label.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.