Skip to main content
Track Bollinger Bands
29 / 45
Search the archiveLibrary
Library

2008issue C041-2

Reading Relative Strength Index extremes on one price axis with Bollinger Bands and moving averages

A Relative Strength Index on a 0 to 100 scale sits in a separate pane and is hard to line up with price by eye. RSI bands restate chosen oscillator levels as implied closes so those cutoffs can be compared with Bollinger Bands and a moving average on the price chart.

  • A Relative Strength Index that lives on a 0 to 100 scale in a separate pane is harder to align visually with price and trend than overlays drawn on the price chart.
  • RSI bands are the hypothetical close that would make the current bar print a chosen Relative Strength Index level, given the prior close and prior oscillator state.
  • Plotting those implied-price bands on the price pane lets 70 and 30 crossings be read without matching a lower oscillator pane by eye.
  • Once Relative Strength Index levels are restated as price bands, they can be read on the same chart as Bollinger Bands and moving averages.
Entries in this reading3 entries
Current trackBollinger Bands84 readingsRelative Strength Index186 readingsMoving average449 readings

Why a separate pane is hard to align with price

A Relative Strength Index is a 0 to 100 oscillator of averaged up versus down closes over a stated lookback, commonly read against 70 and 30. When that oscillator lives in a separate pane, it is harder to align visually with price and trend than overlays drawn on the price chart.

RSI bands invert chosen oscillator cutoffs into implied prices so Relative Strength Index extremes, Bollinger Bands, and a moving average can be compared on one price axis instead of being stitched together across panes.

What RSI bands are

RSI bands are the hypothetical close that would make the current bar print a chosen Relative Strength Index reading, given the prior close and prior oscillator state. They are drawn as overlays on the price chart.

The construction can target any oscillator level and lookback. 70 and 30 are the usual pair because they match common overbought and oversold cutoffs.

A 14-bar construction at 70 and 30

A worked construction uses a 14-bar lookback and targets of 70 and 30, updating running averages of up and down closes to solve for the implied close at each target.

Very short lookbacks make the implied-price bands highly volatile. An optional clamp can hold each band within about 10 percent of the current price.

Reading 70 and 30 on the price pane

Plotting the implied-price bands on the price pane lets 70 and 30 crossings be read without matching a lower Relative Strength Index pane by eye.

The shape of the price-space bands can mark protruding highs or lows that would not generate a conventional 70/30 Relative Strength Index cross.

The same axis as Bollinger Bands and moving averages

Once Relative Strength Index levels are restated as price bands, they can be read on the same chart as other price-based models such as Bollinger Bands and moving averages.

Bollinger Bands are a price-space envelope that can sit on the same axis once those oscillator levels are restated as implied prices. A moving average is a price-space smoother that becomes combinable with Relative Strength Index in the same way.

Other custom-scale indicators

The same invert-to-price-space step can be applied to other custom-scale indicators that otherwise require a separate window.

Alcoa daily price with RSI 70/30 bands and Bollinger upper band

Alcoa’s 2006 daily chart restates the 70 and 30 RSI cutoffs as implied dollar prices so those levels sit on the same axis as the close and the 15-bar, two-sigma Bollinger upper band. A trader can see the May spike drive the 70 band above the envelope, the July and November 30-band troughs that never wait on a pane-to-pane RSI cross, and the December close still inside both sets of bands. The 19 December 2006 point uses the printed snapshot on the figure; earlier points were read from the plotted curves.
Alcoa’s 2006 daily chart restates the 70 and 30 RSI cutoffs as implied dollar prices so those levels sit on the same axis as the close and the 15-bar, two-sigma Bollinger upper band. A trader can see the May spike drive the 70 band above the envelope, the July and November 30-band troughs that never wait on a pane-to-pane RSI cross, and the December close still inside both sets of bands. The 19 December 2006 point uses the printed snapshot on the figure; earlier points were read from the plotted curves.AA · Daily · 2006-01-04T00:00:00.000Z to 2006-12-19T00:00:00.000Z

The figure header fixes RSI bands at 70 and 30 and Bollinger Bands on close with length 15 and two standard deviations. The lower pane is labeled RSI(15); the article’s AmiBroker listing uses a 14-bar RSI. Digitized values are approximate except the printed 19 December 2006 readings.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
29 of 45 in the Bollinger Bands track
201147-54 pp.Next on Bollinger BandsThree-filter confirmation for short-swing futuresLimit the stack to three tools so a crowded overlay cannot issue buy and sell prompts at the same time and freeze the decision.
All readings on this track · 45 readings
  1. 1992Constructing volatility-scaled bands with relative strength index confirmation
  2. 1994Implied volatility as a band-defined regime filter for index options
  3. 1995Constructing projection bands from least-squares slopes
  4. 1995Constructing regression projection bands and range oscillators
  5. 1996Constructing Bollinger bands, percent-b, and stochastics
  6. 1996Constructing mechanical rules from Bollinger Bands and stochastics
  7. 1996Constructing a standard-error envelope around a linear regression
  8. 1996Dual-horizon ratio envelopes and regression error channels
  9. 1997Rational group structure with a trend screen, RSI, and bands
  10. 1997Asymmetric volatility band construction
  11. 1998Constructing three-state filters from Bollinger band envelopes
  12. 1999Combination filters with Bollinger Bands and the relative strength index
  13. 1999Constructing stochastic timed exits and band-RSI reversals
  14. 1999Evaluating Bollinger Bands against fixed-width and range-based envelopes
  15. 2000Constructing a Bollinger Band target as a forward price
  16. 2001Numeric candlestick encoding with local size bands
  17. 2001Ranked candlestick sentiment to band-cross entries
  18. 2002Combining Bollinger Bands, RSI, and a stop-loss
  19. 2002Bollinger Bands remain filters, not forecasts
  20. 2002Constructing a stochastic RSI with Bollinger bands
  21. 2002Constructing a StochRSI and Bollinger mechanical system
  22. 2003Constructing volatility-scaled Bollinger envelopes
  23. 2003Why tick breadth fails as a market personality
  24. 2005Constructing Bollinger bands versus fixed trading bands
  25. 2006Squared versus absolute deviation in envelope construction
  26. 2006Confirming yen crossovers with implied volatility and bands
  27. 2006A daily candle reversal is a hypothesis until shorter sessions fail at the same zone
  28. 2008Rebuild the Relative Strength Index as price-scale bands
  29. 2008Reading Relative Strength Index extremes on one price axis with Bollinger Bands and moving averages
  30. 2011Three-filter confirmation for short-swing futures
  31. 2011Constructing an inverse Fisher stochastic with bands and averages
  32. 2012Constructing a Bollinger Band indicator suite
  33. 2012Stacking price extremes, crossovers, bands, and MACD
  34. 2012Adaptive Bollinger band impulse, trend, and momentum filters
  35. 2013Rescaling stochastic, percent-B, and wave-count parameters
  36. 2014Industry-group quartile pivots as a Bollinger Bands case study
  37. 2014Bollinger Bands as adaptive price envelopes: a 2014 classroom case
  38. 2016Trend-channel entry rules from stacked moving averages
  39. 2016A permission stack for Bollinger, RSI, and the 50-period average
  40. 2017Constructing weighted Bollinger bands and volume averages
  41. 2017Four swing-entry rules that share a timed exit
  42. 2017Two-wave monthly cycles as a regime filter
  43. 2019Constructing exponential-deviation-bands from a midline-average
  44. 2020Critiquing exponential variants of Bollinger Bands
  45. 2020Constructing selectable volatility and moving-average bands
By fieldIndicators and filters682 readingsBy year200867 readings
All 84 readings tagged Bollinger Bands
Also on Bollinger Bands5 readings
1992Constructing volatility-scaled bands with relative strength index confirmation2003Constructing volatility-scaled Bollinger envelopes2016A permission stack for Bollinger, RSI, and the 50-period average1997Rational group structure with a trend screen, RSI, and bands1999Combination filters with Bollinger Bands and the relative strength index