Comments on: Commodities Fall Sharply this Week http://blog.afraidtotrade.com/commodities-fall-sharply-this-week/ Helping traders overcome fears and emotions in trading Thu, 09 Feb 2012 12:51:11 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Corey Rosenbloom http://blog.afraidtotrade.com/commodities-fall-sharply-this-week/comment-page-1/#comment-54996 Corey Rosenbloom Sat, 22 Mar 2008 22:20:55 +0000 http://blog.afraidtotrade.com/commodities-fall-sharply-this-week/#comment-54996 Thank you for providing the chart examples and for the comment! You have highlighted a major divergence between those two indexes and the standard MACD indicator. Positive divergences like this hint at upside potential. For me, I use settings of 3, 10, and 16 on the MACD to capture shorter term swings and capture a shorter-term moving average distance, but yes, either way, it's a clear divergence. In the CMT material, divergences don't have specific targets, but can aid in your analysis of chart patterns that do. For example, if there's a positive divergence on a symmetrical triangle formation, then that would add greater odds to price achieving (let's say) an upside target which would be equal to the distance of the height of the triangle. I want to run some more tests, but from what I've found in my own trading and analysis, momentum divergences are like springs that unwind (sometimes sharply) and when they do, they typically unwind to where the price was located at the first swing of the divergence (when it was forming). It's almost as though the resolution completely negates the divergence in the first place, but again I need more testing to validate this. Until then, divergences serve as an observational tool to highlight hidden features within the structure of price that aren't seen by those who aren't using that tool. Excellent observation! Thank you for providing the chart examples and for the comment!

You have highlighted a major divergence between those two indexes and the standard MACD indicator. Positive divergences like this hint at upside potential.

For me, I use settings of 3, 10, and 16 on the MACD to capture shorter term swings and capture a shorter-term moving average distance, but yes, either way, it’s a clear divergence.

In the CMT material, divergences don’t have specific targets, but can aid in your analysis of chart patterns that do. For example, if there’s a positive divergence on a symmetrical triangle formation, then that would add greater odds to price achieving (let’s say) an upside target which would be equal to the distance of the height of the triangle.

I want to run some more tests, but from what I’ve found in my own trading and analysis, momentum divergences are like springs that unwind (sometimes sharply) and when they do, they typically unwind to where the price was located at the first swing of the divergence (when it was forming). It’s almost as though the resolution completely negates the divergence in the first place, but again I need more testing to validate this.

Until then, divergences serve as an observational tool to highlight hidden features within the structure of price that aren’t seen by those who aren’t using that tool.

Excellent observation!

]]> By: ArizonaChartist http://blog.afraidtotrade.com/commodities-fall-sharply-this-week/comment-page-1/#comment-54386 ArizonaChartist Sat, 22 Mar 2008 05:10:30 +0000 http://blog.afraidtotrade.com/commodities-fall-sharply-this-week/#comment-54386 Good stuff, Corey! Since you mentioned the momentum divergence in gold just thought I'd bring to your attention the momentum divergences in the S&P and the Nasdaq. http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=9&dy=0&id=p46011663706 http://stockcharts.com/h-sc/ui?s=$COMPQ&p=D&yr=0&mn=9&dy=0&id=p27478401987 One thing I was wondering which may be part of your CMT studies; what is the generally accepted method, if any, for calculating the upside target should the positive momentum divergences in the S&P and the Nasdaq be resolved? Good stuff, Corey! Since you mentioned the momentum divergence in gold just thought I’d bring to your attention the momentum divergences in the S&P and the Nasdaq.

http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=9&dy=0&id=p46011663706

http://stockcharts.com/h-sc/ui?s=$COMPQ&p=D&yr=0&mn=9&dy=0&id=p27478401987

One thing I was wondering which may be part of your CMT studies; what is the generally accepted method, if any, for calculating the upside target should the positive momentum divergences in the S&P and the Nasdaq be resolved?

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