This is an outside reversal set up from Frank Ochoa's book Secrets of a Boss. He recommends using this in confirmation with but I guess you can play with any other indicator of your choice.
PATTERN PSYCHOLOGY "The power behind this pattern lies in the psychology behind the traders involved in this setup. If you have ever participated in a breakout at support or resistance only to have the market reverse sharply against you, then you are familiar with the market dynamics of this setup.
Basically, market participants are testing the waters above resistance or below support to make sure there is no new business to be done at these levels. When no initiative buyers or sellers participate in range extension, responsive participants have all the information theyneed to reverse price back toward a new area of perceived value."
// Created by Cristian.D - from Secrets of a Pivot Boss - Frank Ochoa study(title="OutsideReversal", shorttitle="OReversal", overlay=true) // ReversalLong = low < low and close > high and open <close ReversalShort = high > high and close < low and open >open // Bar Colors and signals plotshape(ReversalLong, title= "ReversalLong", location=location.belowbar, color=lime, style=shape.arrowup, text="BUY") plotshape(ReversalShort, title= "ReversalShort", location=location.abovebar, color=red, style=shape.arrowdown, text="SELL") bgcolor(ReversalLong ==1 ? lime : ReversalShort==1 ? red : na, transp=70)