A Quick Lesson in Divergent Reversals for the US Dollar

Nov 1, 2016: 11:04 AM CST

Many traders love reversal patterns but so many traders get trapped in false reversals in real time.

Here’s the @DX (US Dollar Index) showing a lesson in real-time reversal patterns as they develop:

First, we have a strong rally up away from the $95.00 @DX level toward $99.00 without a major pullback.

Momentum – as seen via the 3/10 Oscillator – was strong in early October during the beginning of the rally and then declined – we call this a “Negative Momentum Divergence” – through the rest of the month.

In late October we saw initial downside price action into the $98.50 support level which set the stage fro today’s breakdown and rapid intraday collapse under $98.00.

The weakening (divergence) in momentum in an extended rally sets the stage for a steeper retracement at a minimum or even a full trend reversal.

Even if you don’t trade the Dollar Index, study the pattern of the uptrend and weakening momentum ahead of the eventual trendline break and moving average cross-over, all of which occur ahead of trend reversals and aggressive short-sell trading opportunities.

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Corey Rosenbloom, CMT

Afraid to Trade.com

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4 Comments

4 Responses to “A Quick Lesson in Divergent Reversals for the US Dollar”

  1. Intelligent Trend Follower Says:

    The US Dollar index has had some very impressive trends the last few years. I’ll be curious to see if it can continue in 2017. I’m positioned accordingly either way!

  2. Traders Love Reversal Patterns - TradingGods.net Says:

    […] By Corey Rosenbloom […]

  3. Khayar Says:

    These sorts of lessons are what you really desire to learn. If we really wish to be successful then we need to be very good at doing things and only then we will have chance of success. I love trading in reversal but just need to plan it out nicely. I get plenty of support and that comes with OctaFX broker using their tidy spreads from 0.1 pips while there is also rebate scheme where I get 50% back on all trades plus much more, it’s all rocking.

  4. Haseeb Hameed Says:

    Looks good situation to enter into things, but we just need to make sure we go ahead with careful way and don’t try to do anything expensive. I like to go with situation that I feel confident with and that’s why I go for following the trend and due to http://www.tradewisefx.com/, I am able to do it with confident having ECN Pro account with zero spread plus much more, it’s complete package here and makes trading with them ever so good.