|
PureBytes Links
Trading Reference Links
|
Things are usually fairly quiet on a Sunday so lets take a look at some
divergence signals using simple indicators
OBV standard On Balance Volume
MA is a 21 per Weighted moving average
Elder Ray (Bull power & Bear Power)
Simple formula but may not be available in all charting
packages
Bull power = High - 13 ema of close
Bear power = Low - 13 ema of close
(black lines are 5 ema of indicator)
Charts produced in Wavewise market spreadsheet
==================================================
Chart attached is current Sep British Pound
Point A Normal divergence, prices make a new high while
Bull power & Bear power
Point B Hidden or springboard divergence, prices make a lower high
Bull & bear power both make higher highs.
Point C Classic "3 rallies to a top" !
Prices make 3 higher highs
Bull & bear power make 3 lower highs
OBV also shows divergence, after point 2 OBV breaks
below its 21 wma and cannot gat back above it, the wma
acts as resistence
Point D Normal divergence between prices and bull power
Divergence on OBV ???
Prices make a lower low, OBV makes a lower
low..........
is this valid divergence ? some would say not some
would say yes.
Look at the difference of the slopes, prices make a
much deeper swing low while OBV is nearly flat, to
me this is valid divergence and I would be on the
lookout for a long entry.
Point E Points 1 &2 show hidden divergence compared to OBV
slope between points 1 & 2 and bear power show
divergence as bear power shows a much higher
low compared to point 2.
Point F Prices complete "3 drives to a bottom"
Hidden divergence with OBV and normal slope divergence
with Bull & bear power.
Obviously, these types of setups are much clearer in hindsight but with
practice they can be found in real time and acted upon.
OBV and Elder Ray were used in this example but the same ideas
work on many oscillators.
Good Trading
Alan
http://www.esosoft.com/traders
Attachment Converted: "c:\eudora\attach\diverge1.gif"
|