Constructing a breakout relative-strength index from two-day range candles

Specify the input bar

The oscillator under discussion is a relative-strength construction that consumes a daily breakout candlestick as its input bar rather than leaving that bar unspecified. A breakout candlestick is a session whose high exceeds the highs of a short prior window and whose low undercuts the lows of that same window, used here as the bar that feeds the oscillator.

A relative-strength index is a bounded oscillator that rescales ordered advance-versus-decline strength over a stated lookback into a forecast-style reading.

The two-day range test

The stated candlestick test requires the session high to stand above the highs of the prior two days and the session low to stand below the lows of those same two days. That lookback is the two-day range test: it compares the current high and low with the highs and lows of the prior two sessions.

A breakout is a range-expansion confirmation in which the current bar extends beyond a defined prior high-low envelope. Candlestick patterns are OHLC identities that classify a session by the geometry of its open, high, low and close relative to neighboring bars. The author directed further background on the breakout candlestick identity to an existing candlestick-pattern discussion rather than restating those pattern rules in the reply.

Passing the bar into the oscillator

Once the daily bar is identified, it becomes the input to the relative-strength construction. A recoder reported that plotted values usually remained between 20 and 80, with only occasional readings outside that band.

Wording the recoders left open

Correspondence questioned how a breakout candlestick can be identified on every session and proposed calling the daily input a blended candlestick instead. A blended candlestick is an alternative label for the daily input bar when a range-expansion identity is formed on every session rather than only on infrequent break events.

A wording challenge asked whether the two-day rule should require a high above each of the last two highs and a low below each of the last two lows, or the highest high and lowest low of that two-day window. Editorial reading: those two questions are the arguments a recoder should settle in the specification, not bury in a default.

What the letters recorded as built

At the time of the letters, a working program existed on one platform while ports to other charting platforms were requested and described as still in progress.