RSI, hammer, and moving-average gates for range hypotheses

A range is a tested corridor

A market is described as range-bound when successive prices stay between a high bound and a low bound because neither side can force a sustained move through those levels. The corridor is marked by connecting nearby highs into a resistance zone and nearby lows into a support zone after at least two to three tests, even when the prints are not identical.

In this usage a support-and-resistance-zone is a band formed by nearby highs or nearby lows that have been tested more than once, not a single identical price print. The repeated tests are what define the range hypothesis.

Tradability comes first

A tight, choppy consolidation is treated as unusable because the gap between the bounds is too small for a stop beyond one extreme and a target toward the other. Range-tradability therefore depends on whether the distance between zones can host that stop and that target. If the corridor is too narrow, the range idea is not taken up.

Timing waits for a recross

Relative Strength Index is a bounded zero-to-100 oscillator built from ordered price observations and used here as a timing overlay. A short is considered only after the reading falls back through 70, and a long only after it rises back through 30.

The recross of the fixed overbought or oversold threshold is the timing event. The first extreme print is not the trigger.

A hammer close confirms the zone

A candlestick-hammer is a rejection candle with a long wick that protrudes from neighboring bars, including pin-style and hammer forms. It is used as a close-at-the-zone confirmation rather than a standalone forecast. A protruding pin-style reversal candle that closes at resistance supports a short, and one that closes at support supports a long.

An alternative timing filter is a false-breakout: a move that prints beyond the established corridor and then closes back inside it.

The average is read with the candle

A companion discussion presents pairing a hammer candle with a moving-average line so the candle signal and the average are read together as one combined hypothesis. The moving average is a smoothing line on ordered prices. Candle structure and average-based context are not treated as separate forecasts.

Editorial reading: when that line begins to travel, it vetoes the range idea. The hypothesis is retired because price is starting to travel instead of oscillate between the zones.

Exits sit beyond the prior extreme

Protective exits are placed beyond the prior extreme: above the earlier high after a short, and below the prior low after a long. Profit-taking is aimed at the opposite zone.

Currency crosses that are not paired with the US dollar are offered as markets that more often display obvious corridors, with the euro and Swiss franc cited because their economies are closely linked.