Excellent Example of Intraday Reversal Preceded by Divergences

Nov 11, 2009: 12:43 PM CST

This morning’s action gave a great example of the “Divergence” lessons, in that dual TICK and Momentum divergences can forecast intraday price reversals of either short or intermediate term degree.  Let’s take a look.


(Click for full-size image)

We’re seeing the @ESZ09 or December S&P futures contract (instead of the usual SPY I show) on the 1-minute timeframe for enhanced clarity.

Price gapped up off the open and then progressed to new intraday highs on a strong rally to fresh 2009 highs as forecast by my prior post “New S&P 500 Highs Forecast by Fifth Sprung Bear Trap“.

As we achieved those new highs, an internal (and intraday) non-confirmation at the highs set-in, creating a “Dual Divergence” (or double divergence) in both the 3/10 Oscillator (Momentum indicator) and – much more importantly – the NYSE TICK (bottom panel).

That’s not to say that a reversal was absolutely guaranteed, but that internals and momentum were NOT confirming the absolute price highs and that information hinted (forecast) for a retracement down at best and reversal at worst – the reversal came to pass.

As an aside, the current intraday lows are being met with a dual Positive Momentum and TICK divergence.  This could also result in an upwards move or second reversal on the day.  Look to see if you can observe this without me labeling it.

I’ll be discussing this concept in my presentation at the Las Vegas Trader’s Expo which you can attend for free.

My presentation “Best Trades to Take Using TICK and Momentum” will be shown live via webinar, and you can attend that for free as well without having to travel all the way to Las Vegas!

If you have not done so already, register for free with the MoneyShow.com and then add my presentation into your calendar/schedule.

I will be speaking (and the webinar will be broadcast live for you) on Thursday, November 19th at 1:15 – 2:15 PST / 4:15 – 5:15 EST (just after market close).

Be sure to stop by and say ‘hey’ if you’ll be attending the Expo and join me live for the webinar if not!

Corey Rosenbloom, CMT

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

2 Comments

2 Responses to “Excellent Example of Intraday Reversal Preceded by Divergences”

  1. ngbstl Says:

    is the 3/10 oscillator study just MACD w/ settings of 3 & 10? …or is this some proprietary indicator? thx!

  2. ngbstl Says:

    is the 3/10 oscillator study just MACD w/ settings of 3 & 10? …or is this some proprietary indicator? thx!