Building a daily score from regression, retracement, and volume

A daily chart built from stacked terms

The construction is specified for daily charts. It keeps formations lasting at most 60 trading days with retracements of no more than 50 percent.

Editorial: read the setup as stacked, inspectable terms, a linear-regression midline first, then Fibonacci-style retracement bands and a volume-slope check, so each method can be audited or removed without treating the whole setup as one visual pattern.

Zigzag swings and the lookback window

Swing location uses a 20 percent close-based zigzag, and the construction is specified to need at least four such swings already present in the chart history.

Lookback length I is one plus the bars since the latest zigzag pivot. The lookback-window is that bar count from the latest zigzag pivot, and a score is issued only when the count falls between 10 and 60 trading days.

Linear regression as the first term

Linear regression is a least-squares midline, slope, and coefficient of determination fitted to ordered closes over a defined lookback, with the same slope form reused on residuals and on volume. A linear-regression slope of closes over I defines the local regression midline.

Residual slopes and a short-term swing count

Closes below and above that midline are accumulated only after the prior pivot date, and separate least-squares slopes are then taken of those down and up residual series. Residual-slopes are those separate least-squares slopes of accumulated closes below and above the regression midline, required to point back toward that line.

A short-term swing count tallies, over the open lookback, crossings between a 5-period simple moving average of the close and the regression midline.

Retracement bands and volume participation

Fibonacci retracement is pullback depth measured as a percent of the prior swing range and gated at the 20, 38, and 50 percent bands used in this construction. Maximum retracement is the greater of the current close's distance to the lookback high or lookback low, divided by the prior zigzag-leg price span and expressed as a percent.

Volume-price analysis is reading participation from the sign of volume's lookback slope together with how price residuals sit around the regression midline. Volume participation is measured as the least-squares slope of volume over the same lookback I.

Gates and the composite formation score

The composite score is evaluated only when I is between 10 and 60 inclusive, the down-residual slope is positive, the up-residual slope is negative, retracement is under 50, and the short-term swing count is at least 3.

When those gates pass, discrete points are added for lookback length (2 if I is at least 15 and under 30; 1 if I is 30 through 55), for a low coefficient of determination of closes (2 if under 0.2; 1 if at least 0.2 and under 0.5), for shallow retracement (4 if under 20; 3 if at least 20 and under 38), and for a negative volume slope (4 points). The composite-formation-score is an integer assembled from time, coefficient of determination, retracement depth, and volume-slope points and retained only when it is greater than zero.