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----- Original Message -----
From: <A
title=mtg1022@xxxxxxxxxxxxx href="mailto:mtg1022@xxxxxxxxxxxxx";>Mikey
To: <A title=mtg1021@xxxxxxxxxxxxx
href="mailto:mtg1021@xxxxxxxxxxxxx";>Mikey
Sent: Thursday, May 23, 2002 6:57 PM
Subject: Re: [MedianLine] Hidden / springboard
divergence
<BLOCKQUOTE dir=ltr
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
The "Hidden Divergence" or
"Set-up" The "set-up" signal (also called "Hidden
Divergence") is a very reliable and powerful, yet often overlooked signal
given by the Stochastic Oscillator as well as other price Oscillators such
as RSI etc.. The daily Coffee chart below shows many "Set-ups" or
"Hidden divergences". The swing higher at point B is much lower than the
swing at point A, however Stochastics shows a much higher peak at point B
than at point A. After the low at point C the market rallied and then pulled
back to make a higher low at point D, the low at D on Stochastics was much
lower at point D than it was at point A, this is a very good Bull set-up
signal (Hidden divergence). This type of divergence signal is different than
the traditional divergence shown at lines "a" and "b" in which the market
makes a higher high and Stochastics makes a lower high and is somewhat
illogical. After the market sold off after the "normal divergence"
signal as prices crossed both 18 and 40 day Moving averages and
it appeared that the trend may have changed ? however, at point E the prices
were higher than at point D, but Stochastics were lower at E than they were
at D, giving a Bull set-up signal. A second set-up signal was given at point
G which was higher in price than F but Stochastics made a lower low G than
F.<IMG alt="Stoch5 Set-up signals"
that normal divergence appears at tops and bottoms and is generally "against
the trend"while hidden divergence occurs at entry points that would be
considered trading "with the trend"Andrew Cardwell (RSI) calls these setups
"positive & negative reversals" and teaches thatpositive reversals
(bullish hidden divergence) only occurs in uptrendsand negative reversals
(bearish hidden divergence) only occur in downtrends.........while I dont
agree with that 100%, I do think that this form of divergence is the most
reliableand offers the better trade setups
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