MPO4: A Candle-Pressure Oscillator with Divergence Detection

Summary

The article describes MPO4, an oscillator that estimates directional pressure by weighting each candle according to its body size relative to a recent average. Bullish and bearish candles contribute positive and negative values, respectively; the contributions are aggregated, normalized, and smoothed. The indicator then uses price and oscillator pivots to identify divergence, aiming to show when price makes a new extreme while measured pressure weakens. The article also discusses non-repainting pivot handling and practical interpretation of divergence signals.

Its evidence is primarily the calculation walkthrough and example indicator behavior; it does not present a systematic performance study. The suggested use is to treat divergence as a warning or possible reversal cue, with stronger context near oscillator extremes and confirmation from trend, support and resistance, or other analysis. Signals can be unreliable in flat or low-volatility markets, and parameter choices affect smoothness and noise. The article explicitly frames divergence as uncertain rather than a guarantee of reversal.

Key ideas

• MPO4 assigns more influence to candles whose bodies are large relative to recent average body size.
• Candle direction gives each weighted contribution a bullish or bearish sign.
• The normalized, smoothed pressure series is compared with price pivots to identify divergence.
• Divergence can warn of weakening pressure but does not guarantee a reversal.
• Trend context and other confirmation may help filter isolated signals, especially in quiet markets.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.