Intraday TICK Divergences and Structure May 13

May 14, 2009: 9:49 AM CST

There were some interesting lessons to learn via the intraday action on May 13, 2009.  Let’s see some of them – particularly three TICK divergences and a fractal Elliott Wave pattern on the trend day.


(click for full-size image, hosted at Chart.ly)

First, we had a large-scale overnight gap (not scaled) which signaled that odds could be favoring a trend day.  The strongest trend days will gap down strongly and not even try to retrace a portion of the move, so the fact that Wednesday retraced a portion of the gap meant that odds for a “Type 3″ Tend Day were reduced… but we still got a powerful move.

A Bearish Rising Wedge formed (notice the 5-wave internal structure – classic textbook pattern) into the intraday highs on our first TICK Divergence.  I want to underscore the importance of TICK Divergences to you.

Price then ejected to the downside to retest the prior lows, and yet another TICK Divergence formed… which was good only for a small scalp as it was a counter-trend move (lower chance of profit).

Price then rolled back to the downside and formed another counterswing up into noon which then led to the strongest down-move of the day.

I’ve subdivided this wave into an Elliott Wave 5-wave Fractal, but more importantly, notice the positive TICK Divergence that formed once the five fractal waves had finished.  You’ll often see powerful inflections or reversals – often times absolute intraday lows – when you see this pattern:  An observable 5-wave structure that terminates into a TICK and/or Momentum Divergence.

Price did reverse, though not impressively, again because the overall structure was calling for a Trend Day Down.  Price chopped its way into the close.

On a separate note, the Breadth (net advancers minus net decliners) continued to trail lower all day (save for the end) which served as a strong confirmation of the continuation of the Trend Day down.

Review your intraday charts for similar lessons in order to better your skills at pattern recognition and intraday confirmation/non-confirmation (similar to what I’ll be advocating and teaching at the Los Angeles Trader’s Expo in early June).

Corey Rosenbloom, CMT
Afraid to Trade.com

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

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Comments
  • Your picture explanation is really good........ It helps easily understand TICK divergences.....

  • u2com

    My EW interpretation can be found at:
    http://scoutfinance.blogspo...

  • meques

    yep, yesterday i had almost the same chart.
    In reply to Ron Brown should tell that that divergences at 12:15 indeed realized but then it was one more push down. Saying more, with a tandem of divergences with 3/10 oscillator, stoch lines, rsi14 and etc i entered there and soon met stop loss. but i again entered after 1pm in more slear and strong divergence, so for the day i was in plus.

    wow, today was hard day for me with lots false signals and ugly incorrect divergences.

  • Yep - divergences aren't 100% - not even TICK divergences which you think would be. It'd be too easy if that were the case!

    I love seeing your charts - thanks for sharing.

  • Ron Brown

    My question refers to the higher high made at around 12:15. How did you know that this high would fail? I don't see a divergence in the TICK at this point? If you were short at that point, what signaled you to stay short? Thanks.
    (this replaces my earlier question which didn't indicate the time of day I was referring to.)

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