Saturday, 25 June 2011

Bullish divergence trading - example 1

Copy from previous post:

Bullish divergence:

  • Price form lower low (A->C), MCAD histogram form higher low (a->c)
  • Must have ABC in price chart and abc in histogram chart
  • a and c below center line, b above center line
above only valid and can go long ONLY if
higher time frame show bullish divergence(weekly), current time frame(daily) show bullish divergence

From my process of searching through the charts to have a sample of the stringent divergence pattern as describe above in bold, I realise that it is not easy to have such chart available. Most of the time, the chart will not demonstrate ALL of the rules above. No wonder it is such a good trading opportunity once such chart are spotted.

In the example below, the daily chart fulfill the abc and ABC.

However, the weekly chart does not fulfill it at all. 

Stringently, the above does not fulfill the daily and weekly bullish divergence. 
However, in the example above, I am using the daily to demonstrate the bullish divergence. 

In this example, a good buy day will be at the day after the vertical line c-C somewhere slightly before mid march around 3.18.


la papillion said...

Hi OT,

Good job...I didn't ask for weekly, but you gave it anyway, so that's effort on your part. Keep it up!

Do you realize why cpl keeps dropping? The long term trend is still down (though there's a potential bullish D on weekly, can you see it?), so no matter whether there's a bullish D on daily or not, the upward movement would still be governed by the weekly.

I'm glad that you realized that such setups are very rare. It's rare enough to find a daily divergence, it's even rarer to find a weekly divergence. It's roughly occurs around 2-3 times a yr only, for weekly.

OT83 said...

Hi LP,

Yup I saw it. The weekly is still down, just like biggest boss giving order, quite hard to disobey it.

Such setup are really rare, I think sometimes dont even has 2-3 times a yr. I have hard time finding.

lastly, thanks for the guidance.

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