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Alan,
I´m not exactly newq to trading, but your input was very good. I
programmed it and start to explore it. Could be a very useful tool.
Just wanted to let you know. Thanks - Ulrich
Alan Sears wrote:
> 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
>
>
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