Powerful Divergences Intraday July 20 SPY

Jul 20, 2009: 8:46 PM CST

Today was a great example to highlight the “Divergences” principle about how the can call key turning points intraday which provide excellent low-risk, high-probability opportunities.  Let’s see some of these as they unfolded on July 20th.


(Please click for full-sized large image)

We had some super-divergences today, including (at least) two examples of the “Three Push” pattern along with dual TICK and 3/10 Oscillator divergences.

As I highlighted in my presentation with FuturePath Trading (“Best Trades Using Structure, Momentum, and TICK), ‘three-push’ patterns (complete with both 3/10 and TICK divergences) yield some of the BEST trading opportunities intraday.

We began with a gap and then progressed in a 5-wave decline into new lows on the day, which happened to form a ‘three push’ 3/10 Oscillator divergence and a single-swing clear TICK positive divergence.  You would place your stop just beneath the day’s low and play for a true trend reversal (which materialized).

You would exit this initial position at the mid-day highs when we formed a counter-three-push pattern reversal complete with three-swing 3/10 Oscillator Divergence and a rare triple-swing negative TICK divergence.  This was a powerful spot to exit your morning trade and put on a short afternoon trade.

This short trade was exited as we formed another 5-wave pattern (not shown) into yet another positive momentum (but this time, not TICK) divergence as the market reversed back up and continued higher on the day.

I felt this day should be a reference/lesson in divergences and trading tactics.

To continue reading, and for full description of the other trading opportunities of the day (including a discussion on money management, targeting, and stop-loss methodology as it relates to the morning’s gap), please subscribe to the “Idealized Trades” daily subscription service (at an introductory rate of only $27.oo per month – less than $1.oo per day).

At the end of each summary, I highlight opportunities and possible structure for the next trading day, beginning with a glance at the daily structure. I hope you will find it to be a valuable educational resource, as I teach these concepts and explain them each day through teaching moments like the above summary (but with more detail).  Please visit this and the other new resources at the Afraid to Trade Premium website.  I would love to have you as a member!

Corey Rosenbloom, CMT
Afraid to Trade.com

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4 Comments

4 Responses to “Powerful Divergences Intraday July 20 SPY”

  1. Anonymous Says:

    Corey, this may be an odd question and I'm new to this so bear with me. Here goes…

    Why does this work?

    I'll use your chart from today as an example. Maybe there is a bit of self-fulfulling prophecy here where if enough participants notice a weakening downtrend they will all jump in long thus creating the rally. But then I thought… if there is a seller for every buyer then there must also be an equivilent number of people who can't see that the downtrend is weakening and are selling. So who the heck is selling at that super divergence you pointed out? Are there really that many people out there who don't know what they're doing? I mean, this basic information about momentum divergences is right here on your website for all to see so why isn't everyone learning this and wising up? Or am I not understanding how supply and demand works? Because it would seem to me that anyone who happened to be long during that downtrend would have noticed the divergences and at least known not to sell out right there at the bottom but to instead expect a potential reversal.

    I have been paper trading for a while now with great success, I use a combination of my own ideas and some tricks I've picked up from others, including yourself. I keep asking the same questions about my own trading system… why does this keep working? I like to think I'm a pretty sharp cookie but still, this isn't rocket science either. I would think that those who are consistently on the wrong side of the trade would smarten up and try to learn from their mistakes. There are times when this almost seems too easy.

  2. vasuban20 Says:

    Hi corey :
    I am wondering if the2nd wave down correction has completed and the 3rd wave of the 4th BIG wave Up has started . Is my elliot wave interpretation correct ?

  3. Anonymous Says:

    Corey, this may be an odd question and I'm new to this so bear with me. Here goes…

    Why does this work?

    I'll use your chart from today as an example. Maybe there is a bit of self-fulfulling prophecy here where if enough participants notice a weakening downtrend they will all jump in long thus creating the rally. But then I thought… if there is a seller for every buyer then there must also be an equivilent number of people who can't see that the downtrend is weakening and are selling. So who the heck is selling at that super divergence you pointed out? Are there really that many people out there who don't know what they're doing? I mean, this basic information about momentum divergences is right here on your website for all to see so why isn't everyone learning this and wising up? Or am I not understanding how supply and demand works? Because it would seem to me that anyone who happened to be long during that downtrend would have noticed the divergences and at least known not to sell out right there at the bottom but to instead expect a potential reversal.

    I have been paper trading for a while now with great success, I use a combination of my own ideas and some tricks I've picked up from others, including yourself. I keep asking the same questions about my own trading system… why does this keep working? I like to think I'm a pretty sharp cookie but still, this isn't rocket science either. I would think that those who are consistently on the wrong side of the trade would smarten up and try to learn from their mistakes. There are times when this almost seems too easy.

  4. vasuban20 Says:

    Hi corey :
    I am wondering if the2nd wave down correction has completed and the 3rd wave of the 4th BIG wave Up has started . Is my elliot wave interpretation correct ?