[blackcat] L1 Swing Reversal

█ OVERVIEW
The script is an indicator that calculates and plots the L1 Swing Reversal, which involves smoothing price data and calculating a modified RSI to identify potential swing reversals in the market. It overlays columns representing the smoothed price data and a line for the adjusted RSI.

█ LOGICAL FRAMEWORK

The script begins by defining input parameters for customizable periods. It then calculates the typical price, derives components of the swing reversal indicator, smooths these components, and computes an adjusted RSI. The main sections include input parameter definitions, function definition, and plotting. The script flows data through calculations and logical operations to produce final plot values.

█ CUSTOM FUNCTIONS

Function: l1_swing_reversal
This function calculates the L1 Swing Reversal indicators based on high, low, close, and open prices, along with three periods. It computes a smoothed price component and an adjusted RSI.

Parameters:
• high: High prices of the asset.
• low: Low prices of the asset.
• close: Close prices of the asset.
• period_n: Period for the first component calculation.
• period_m: Period for standard deviation and moving average calculations.
• period_n1: Period for RSI calculation.

Return Values:
• cc1_column_red: Red column values for the first component.
• cc1_column_green: Green column values for the first component.
• rsi: Adjusted RSI values.

█ KEY POINTS AND TECHNIQUES

The script uses several key Pine Script features such as the sma (simple moving average), stdev (standard deviation), max, abs, and ema (exponential moving average) functions. It also demonstrates the use of conditional operators to cap the column values at -100 and 100. The script’s structure is clear and follows best practices by encapsulating the main logic within a function and using descriptive variable names.

█ EXTENDED KNOWLEDGE AND APPLICATIONS

Potential modifications could include adding more sophisticated reversal signals based on the RSI and column values, or enhancing the visualization with additional plot types. This script could be used in scenarios where traders are interested in identifying potential swing reversals using a combination of smoothed price data and momentum indicators. Related Pine Script concepts include using barssince for counting bars since a condition, crossover and crossunder for detecting trend changes, and hline for adding horizontal lines to the chart.