Lengthy Divergence Resolved

Jan 14, 2008: 10:35 AM CST

I always love divergence patterns and their resolution in the market. A full-day divergence on the 5-minute chart from Friday is being resolved today, with the birth of a new intraday uptrend on the 5-minute chart. The market simply cannot make up its mind.

Extended Divergences are patterns where you can almost feel the surrender on behalf of the losing side, as they continue to (in this case) push the market lower on shallower swings. Eventually, the energy will dissolve and the opposing force (buyers) will gain momentum and drive prices higher.

Divergences occur on any time frame, and of course longer time frame divergences are more significant than shorter time frames (such as the one above).

They are very beautiful and simple patterns, and I try to highlight them for you when they occur.

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