Pivot, Divergence, and Elliott

Nov 18, 2008: 1:31 PM CST

As we head into the ‘lunch’ period, I wanted to show a fascinating price structure occurrence that led to a couple of high-probability, low risk trading opportunies this morning.  It includes a Daily R1 Pivot Point, a negative momentum Divergence, and a possible complete Elliott Wave minor count.  Let’s see them in action.

DIA 5-min chart:

The market actually opened without a gap this morning – fancy that.

Price initially surged to meet confluence resistance via the falling 20 period EMA and the “Daily Pivot” (blue dotted line – autogenerated).  Price failed to overcome these levels and then fell but did not make a new low on the day.  Notice that had it done so, it would have likely made a major positive momentum divergence.  As such, price formed a doji just above support from yesterday’s low (a retest) and headed higher, breaking the two key EMAs only to fail at the upper Bollinger Band before swinging back down.

Price then found support at the 61.8% Fibonacci retracement of the prior Wave 3 before forming a mini-Elliott 5-wave impulse higher which completed the 5th Wave in my chart.  Keep in mind that Wave 4 gently entered the price territory of the previous wave 1 so keep that in mind.

Price made new highs on the day on a precarious note – price tested the daily R1 (First Resistance) Pivot (again, auto-generated using yesterday’s price data via TradeStation) on a clear negative momentum divergence.  That was a sufficient signal to exit any long position and set-up an aggressive ‘scalp’ short which targeted the EMAs.

Price ultimately failed at EMA support and plunged now to new lows on the day.  Of interest, the day’s S1 (First Support) pivot – not shown – is near $81.80.  We could see a move down temporarily pause there or reverse if a positive momentum divergence develops.

This represents a quick example of how to combine multiple methods into trading decisions throughout the day.


5 Responses to “Pivot, Divergence, and Elliott”

  1. Anonymous Says:

    Man how many different indicators are you using !

  2. Corey Rosenbloom Says:

    And here I thought I went indicator-light!

    3/10 Oscillator
    Bollinger Bands
    20, 50 EMA and 200 SMA

    Daily Pivots
    ADX color-band

  3. Anonymous Says:

    On your earlier posting on ADX compression, could you please show what it looks like currently, and with your insights? Tia!

  4. Dominick Says:

    Corey looks like you were right on the money with the S-1 pivot and divergence. Keep up the good work, thanks for the insights.

  5. ?????? Says:

    If you know of more useful tools please post a comment.