Trend-Adaptive 3-Band Reversal Cloud

This indicator plots a trend-adaptive, volatility-based 3-band cloud on your chart to visually contextualize potential high-probability reversal, balance, and exhaustion price zones — all in strict alignment with TradingView’s house rules and best compliance practices.

How It Works
Trend Detection:
The script determines short-term trend direction using two adjustable EMAs (fast and slow). When the fast EMA is above the slow, the environment is classified as an uptrend; when below, as a downtrend.

Adaptive Bands and Clouds:

• Around the dynamic trend baseline, three cloud “bands” are drawn using multiples of an ATR (Average True Range) volatility filter, automatically adjusting for evolving market conditions:
  
• Middle Band (Fair Value Zone): Area around the baseline, where price is statistically balanced.
  
• Upper Outer Band: In an uptrend, this shows a potential 'exhaustion/overextension' area; in a downtrend, it can act as a deep pullback or reversal area.
  
• Lower Outer Band: In an uptrend, this highlights a possible 'deep pullback/reversal' area; in a downtrend, it becomes the potential exhaustion zone.
  

Contextual RSI Markers:
When price is in one of the outer bands and RSI is overbought (upper) or oversold (lower), a tiny diamond marker appears on that band as extra context — offering a visual cue for a possible high-momentum exhaustion or deep reversal zone, but never a trade signal or advice.

Visuals and Compliance:

• All cloud regions use three different, semi-transparent colors for easy reading, and never block price action.
  
• Labels indicate only “Possible Exhaustion,” “Deep Pullback Zone,” and “Balanced/Fair Value”—the language is strictly neutral and descriptive.
  
• All calculations run only on confirmed, historical bars with zero repainting, no future bar lookahead, and no predictive overlays.
  

How to Use
Add to Chart:
Simply add the indicator to any chart and timeframe.

Configure:

• Adjust the EMA, ATR, and RSI settings via the input panel to best fit your instrument and preferred sensitivity.
  
• Choose band multipliers to widen or contract the cloud according to volatility or your system.
  
• Toggle RSI marker/context highlighting as desired.
  

Interpretation:

• Middle Cloud (“Balanced/Fair Value”): Price in this zone suggests mean reversion, equilibrium, or fair pricing for the session’s volatility/trend conditions.
  
• Outer Clouds: If price reaches an outer cloud, pay attention for potential mean-reversion (if trend persists) or exhaustion zones (especially if a diamond appears).
  
• Uptrend: Lower cloud is where larger pullbacks/reversals are often initiated; upper cloud indicates potential trend exhaustion.
  
• Downtrend: Upper and lower clouds are reversed in interpretation.
  
• Diamond Markers: A red diamond atop the upper band signifies RSI overbought; a lime diamond below the lower band shows RSI oversold. These do not recommend trading—only highlight increased likelihood that buyers/sellers may be overextended.
  

Best Practices:

• Do not use the indicator in isolation or as a signal generator. Combine its context with price action confirmation, volume, or other non-repainting tools.
  
• Use labels only for navigation/context, never as actionable advice.
  

Technical Details

• Inputs/Customization: Fully adjustable (EMAs, ATR period, band multipliers, RSI thresholds, label/marker toggles).
  
• Logic: All code processes only historical closed bars and overlays information in real time.
  
• No repaint, strategy, or alerts: No signals, no script-driven trading, and no claims of prediction or guaranteed probability.
  
• House-rule Clean: The script and its visuals are compliant with TradingView’s publishing requirements, both visually and textually.
  

Summary:
This tool is designed for traders who want to visually frame high-probability reversal, equilibrium, and exhaustion zones adaptively—while keeping price action primary and avoiding visual or conceptual clutter. Use it to better understand where price may statistically find resistance/support or revert, not to automate signals or guarantee outcomes