Second-low confirmation with a percentage oscillator and money-flow filter

The delay inside a traditional double bottom

Traditional double-bottom completion is defined as a push through the intervening reaction high after two roughly equal lows. That definition delays entry until price is already well above the tested support.

Waiting for that neckline confirmation can force a stop either tight enough to invite a whipsaw or so near the prior low that the reward-to-risk geometry deteriorates.

A complementary oscillator and money-flow pair

The construction pairs a close-based percentage oscillator with a volume-based money-flow measure specifically to avoid stacking two close-only momentum tools that describe the same information. Multicolinearity, in this usage, is that error of stacking indicators that share the same input and describe the same price change.

How the percentage oscillator is built

The percentage oscillator uses 12- and 26-period exponential averages and a 9-period exponential trigger, the same common MACD window, to mark momentum changes over about two to five weeks. Those paired short and long exponential averages set the oscillator sign and define that two-to-five-week momentum window.

Unlike absolute MACD, the oscillator scales the short-minus-long average difference by the short average so the same construction can be compared across different price levels and longer histories. In this workflow the oscillator is a momentum confirmation filter rather than a standalone entry.

Spreadsheet construction seeds simple averages, then recurses each exponential average with factor 2/(N+1). The oscillator is formed as (12-EMA - 26-EMA)/12-EMA, and that series is smoothed with a 9-period exponential trigger. The same recursive weighting is used for the 12-, 26-, and 9-period averages and for the trigger line.

What completes a second-low confirmation

A second-low confirmation is treated as complete only after a positive oscillator divergence is validated by a cross above the 9-period trigger, typically while the oscillator is still negative. Positive divergence here means a second decline that is weaker on the oscillator than on price. That weaker reading is not treated as confirmation until the trigger cross occurs.

Buying pressure at the second low

Money flow is computed from close location in the high-low range times volume over 15 periods so buying pressure can stay positive even on a down close. A reading above +10% is the preferred condition near the second low.

The 15-period money-flow window is chosen to stay near the oscillator's 12-period short average while covering three full weeks rather than a 10-period span judged too short.

A short-term reversal as the timing catalyst

A one- to two-day reversal at the second low is required as the timing catalyst after the oscillator and money-flow filters. The accepted forms are engulfing, hammer, morning star, piercing, outside reversal, or breakaway gap.