CVD Divergence Background By HK

Overview This indicator visualizes Delta Divergences (also known as Absorption) directly on your main chart. It highlights candles where the price direction contradicts the underlying net volume flow (CVD). This is a powerful method to spot "traps," limit order absorption, and potential reversals.

How it Works The script calculates the Intrabar Volume Delta based on price action relative to the candle's range. It then compares this Delta with the candle's color (Open vs. Close).

Bearish Divergence (Absorption Top):

Scenario: The candle is GREEN (Price closed higher), but the Volume Delta is NEGATIVE (Net Selling).

Visual: Red Background.

Meaning: Sellers are aggressively absorbing the buying pressure via limit orders. Price struggled to rise despite the volume.

Bullish Divergence (Absorption Bottom):

Scenario: The candle is RED (Price closed lower), but the Volume Delta is POSITIVE (Net Buying).

Visual: Green Background.

Meaning: Buyers are aggressively absorbing the selling pressure via limit orders. Price struggled to fall despite the volume.

Features

Background Highlighting: Instantly spot divergences without checking a separate oscillator window.

Seamless Integration: Works perfectly behind your price candles and other indicators (like Big Trade detectors).

Customizable: You can adjust the colors and transparency to fit your chart theme.

Use Case Use this to identify exhausted moves. If you see a green candle with a red background at a resistance level, it suggests that buyers are running into a wall of sellers, increasing the probability of a reversal.