Evaluating zero-line patterns on a breadth-price oscillator

A short-range oscillator under price

A basic oscillator can be the gap between a session close and a 20-day simple moving average of closes, plotted under price so oscillator shapes can be compared with the market path.

A short-range oscillator can combine daily advances, daily unchanged issues, and industrial-average closes, using each series gap from its moving average. Daily advance and unchanged counts are used with index closes so the reading reflects how widely a session is shared, not only how far one average moved.

Pattern reading starts at the zero line

Charts of that oscillator use a horizontal zero line of neutral values, and pattern reading is defined relative to that line. Named patterns are defined by how values leave that line and return to it.

Overbought and oversold position lines

Standard thresholds treated readings of 4.0 or higher as overbought and readings of -4.0 or lower as oversold, with the caveat that those states can persist.

Horizontal oscillator thresholds, including a zero or neutral reference, are used to mark stretched, failed, or persistent position relative to recent averages.

Editorial reading: keep those generic overbought and oversold prints as the control case. The named condition is the rule written against the zero line, not the first print beyond a threshold.

Double-top and double-bottom rules

A double-top or double-bottom is two successive oscillator excursions away from a neutral line and back, each with a stated depth and a stated completion window.

A double-bottom rule was specified as two drops from the zero line to -2.3 or lower, each recovering to the line or above, inside a six-to-ten-week window.

A double-top rule was specified as two rises from the zero line to +2.8 or higher that returned to the line in four to eight weeks, with some cases extending toward twelve weeks.

A higher double-top rule was specified as a move to +4.2 or more, a retreat to +2.7 or lower, and a return to +4.2 or higher in less than eight weeks.

Failed holds and persistence windows

Failed holds were coded separately. A failed hold is a crossing of the zero line that never reaches a stated height or depth before reversing. The coded cases were a climb that stayed no higher than +1.3, or a dip only into the -1.5 to -2.1 band before returning to the zero line.

Duration rules treated five to eight consecutive weeks above +1.0 followed by a drop, and two-and-a-half to three-and-a-half weeks below zero followed by a cross above the line, as single-top and single-bottom conditions. A persistence window is a consecutive multi-week stay above or below a stated oscillator level that is treated as its own setup when the stay later breaks.

Catalog pattern-and-outcome rules

The evaluation organized the oscillator into seven named pattern uses and recommended cataloging pattern-and-outcome rules instead of relying on informal indicator stories.