Close-minus-average oscillator for channel extremes

Channel extremes and the missing midline

A trend-channel is a pair of parallel price boundaries around a directional midline. The upper parallel is treated as a supply-line, a resistance area that fails to attract further demand. The lower parallel is treated as a demand-line, an accumulation area where buyers appear. The center line states trend direction, and price oscillates to both extremes while the trend remains intact.

An overbought state is a stretch above the trend baseline in which further upside has only a minor chance of continuing because buyers cannot push price higher. That rest is located at the upper side of a rising trend-channel, near the supply-line.

An oversold state is the point below the trend baseline at which sellers stop liquidating or adding shorts. Remaining supply is scarce, so any buying can lift price.

Subtracting the center line from each daily close produces an oscillator whose zero line is that same center line. The live midline is hard to observe, so the center of the channel cannot be read as a finished number while the trend is still forming.

A short average as the midline-proxy

A 5-day moving average is used as a short-term directional proxy for that unseen center. The close-minus-average-oscillator is then defined as the current close minus that average, plotted around a zero line that represents the average itself.

A zero-line-cross above zero means the close is above the 5-day average and is treated as a short-term positive reading.

Bands that change after a range becomes a trend

In the March to May window, oscillator values of +20 to +30 were treated as overbought and -30 as oversold. A later move above the May highs printed +50 and raised the overbought reference.

After a shift from a sideways range to an upward trend, the oscillator overbought and oversold levels can be reset. Those thresholds function as an adjustable-band, revised after the change rather than held fixed.

From early May through mid-June the oscillator stayed above zero except for one close. A mid-June pullback followed another +50 reading, and a late-June advance followed a return to -30.

How the procedure reads the oscillator

The specified procedure uses the oscillator to identify trend direction, mark overbought stretches as reduction points, and mark oversold stretches as purchase points. It does not authorize entries that oppose the stated trend view.