Nov 2 is a Day of Intraday Divergence Lessons

Nov 2, 2009: 3:22 PM CST

I wanted to follow-up from this morning’s post in highlighting the TICK and Momentum Divergence concept and note that we had two additional examples of the concept – making that three clear examples of the trade set-ups and possible trend reversals that can come when momentum and TICK divergences form intraday.


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Without going into a full explanation (see morning post for the logic of divergences), we see two more examples of the divergence or “non-confirmation” concept.

We had the early morning negative Momentum and TICK divergence precede a price reversal to the downside;

at 12:00 CST / 1:00 EST, we had a lengthy positive divergence in TICK and Momentum precede a reversal back to the upside;

and finally, we had a 2:00 CST negative TICK and momentum divergence precede what appears to be a reversal back to the downside that’s taking shape.

Remember that not all divergences lead to price reversals – just like no pattern in technical analysis is fail-proof – but what we’re looking for is higher probability, lower-risk set-ups, and it is my belief that divergences can offer good trading set-ups, along with helping confirm trend structure.

Under the principle “Momentum Precedes Price,” divergences can precede price reversals or retracements when paired with absolute new price highs or lows.

Again, I teach these concepts in more detail to the members of the Idealized Trades service, but I always want to highlight these examples when crystal clear examples show themselves each day.

Take the time to learn this concept if you have not already.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

6 Comments

6 Responses to “Nov 2 is a Day of Intraday Divergence Lessons”

  1. Dan de Man Says:

    I think you're right Corey. Today's closing candle is a doji and we have positive divergance on the 3/10/16 histogram. Looks like a low risk swing trade to me. I also added Larry Connors RSI 2 on my charts and that has positive divergance too.

    On top of that we have a negative divergance on UUP and a doji.

    Green light long but anything can happen. I guess that's what makes it exiting!

  2. Corey Rosenbloom, CMT Says:

    True – positive intraday divergences though price is a hair under support levels including a trendline from the prior three lows and the 50 day EMA both at 1,047.

    The lower Bollinger Band (daily) is at 1,035 so we're seeing perhaps the last levels of support, but we could also see yet another of the many 'bear traps' we've seen since July.

    Exciting about sums it up! Though I see both bulls and bears being frustrated over the last week or so.

  3. kbmartin Says:

    Corey,

    If you're willing to share, what settings do you use on that momentum oscillator?

    Thanks
    Kevin

  4. Dan de Man Says:

    I think you're right Corey. Today's closing candle is a doji and we have positive divergance on the 3/10/16 histogram. Looks like a low risk swing trade to me. I also added Larry Connors RSI 2 on my charts and that has positive divergance too.

    On top of that we have a negative divergance on UUP and a doji.

    Green light long but anything can happen. I guess that's what makes it exiting!

  5. Corey Rosenbloom, CMT Says:

    True – positive intraday divergences though price is a hair under support levels including a trendline from the prior three lows and the 50 day EMA both at 1,047.

    The lower Bollinger Band (daily) is at 1,035 so we're seeing perhaps the last levels of support, but we could also see yet another of the many 'bear traps' we've seen since July.

    Exciting about sums it up! Though I see both bulls and bears being frustrated over the last week or so.

  6. Kevin Says:

    Corey,

    If you're willing to share, what settings do you use on that momentum oscillator?

    Thanks
    Kevin