Bollinger Bands (SMA 21, 2.618σ)

Indicator Description: Bollinger Bands (2.618σ, 21 SMA) + RSI with Fibonacci

This custom indicator combines Bollinger Bands and Relative Strength Index (RSI), enhanced with Fibonacci-based configurations, to provide confluence signals for rejection candles, reversal setups, and continuation patterns.

Bollinger Bands Settings (Customized)

Middle Band → 21-period Simple Moving Average (SMA)

Upper Band → SMA + 2.618 standard deviations

Lower Band → SMA − 2.618 standard deviations

These parameters expand the bands compared to the traditional (20, 2.0) settings, making them better suited for volatility extremes and higher timeframe swing analysis.

Color Scheme

Middle Band = Orange

Upper Band = Red

Lower Band = Green

This color-coding emphasizes key rejection levels visually.

Candle Rejection Logic
The indicator is designed to highlight potential rejection candles when price interacts with the outer Bollinger Bands:

At the Upper Band, rejection signals suggest overextension and potential downside reaction.

At the Lower Band, rejection signals suggest oversold conditions and potential upside reaction.

Rejection Candle Types Tracked

Hammer (bullish reversal, lower rejection wick at bottom band)

Inverted Hammer (bearish reversal, upper rejection wick at top band)

Doji candles (indecision at band extremes)

Double Top formations near the upper band

Double Bottom formations near the lower band

Relative Strength Index (RSI) Settings

RSI is configured with Fibonacci retracement levels instead of traditional 30/70 thresholds.

Fibonacci sequence levels used include:

23.6% (0.236)

38.2% (0.382)

50% (0.5)

61.8% (0.618)

78.6% (0.786)

This alignment with Fibonacci ratios provides deeper market structure insights into momentum strength and exhaustion points.

Trading Confluence Zones

Upper Band + RSI at 0.618–0.786 zone → High probability bearish rejection.

Lower Band + RSI at 0.236–0.382 zone → High probability bullish reversal.

Band interaction + Doji or Hammer candles → Stronger signal confirmation.

Use Cases

Identifying trend exhaustion when price repeatedly fails to break above the upper band.

Spotting accumulation or distribution phases when price consolidates around Fibonacci-based RSI zones.

Detecting false breakouts when candle patterns (like Doji or Inverted Hammer) occur beyond the bands.

Why 2.618 Deviation & 21 SMA?

Standard Bollinger Bands (20, 2.0) capture ~95% of price action.

By widening to 2.618σ, we target extreme volatility outliers — areas where reversals are statistically more likely.

A 21-period SMA aligns better with common cycle lengths (3 trading weeks on daily charts) and Fibonacci-related time cycles.

Practical Strategy

Step 1: Watch when price touches or pierces the upper/lower band.

Step 2: Check for candle rejection patterns (Hammer, Inverted Hammer, Doji, Double Top/Bottom).

Step 3: Confirm with RSI Fibonacci levels for confluence.

Step 4: Trade with the prevailing trend or look for reversal setups if multiple confluence factors align.

Cautions

Not all touches of the bands signal reversals — strong trends can ride along the bands for extended periods.

Always combine with price action structure, volume, and higher timeframe trend bias.

📌 Summary
This indicator blends volatility-based bands with Fibonacci momentum analysis and classical candle rejection patterns. The combination of Bollinger Bands (21, 2.618σ) and RSI Fibonacci levels helps traders detect high-probability rejection zones, reversal opportunities, and overextended conditions with improved accuracy over traditional default settings.