As of 04/18/2024
Indus: 37,775 +22.07 +0.1%
Trans: 14,947 -39.62 -0.3%
Utils: 860 +6.95 +0.8%
Nasdaq: 15,602 -81.87 -0.5%
S&P 500: 5,011 -11.09 -0.2%
|
YTD
+0.2%
-6.0%
-2.4%
+3.9%
+5.1%
|
 39,800 or 37,150 by 05/01/202416,200 or 15,000 by 05/01/2024885 or 850 by 05/01/202416,700 or 15,800 by 05/01/20245,250 or 5,025 by 05/01/2024 |
As of 04/18/2024
Indus: 37,775 +22.07 +0.1%
Trans: 14,947 -39.62 -0.3%
Utils: 860 +6.95 +0.8%
Nasdaq: 15,602 -81.87 -0.5%
S&P 500: 5,011 -11.09 -0.2%
|
YTD
+0.2%
-6.0%
-2.4%
+3.9%
+5.1%
| |
|
39,800 or 37,150 by 05/01/202416,200 or 15,000 by 05/01/2024885 or 850 by 05/01/202416,700 or 15,800 by 05/01/20245,250 or 5,025 by 05/01/2024 | ||
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Trading Basics
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Divergence occurs when an indicator trends in one direction and price trends in another direction. Specifically, an indicator will make lower highs while price makes higher peaks, or the indicator will make higher valleys even as price tumbles to new lows.
Divergence is a reliable trading signal, but it's not timely, meaning that price usually follows the direction of the indicator, but it make take months before it does.
Bearish divergence (see adjacent chart) occurs when price makes a higher high but the indicator forms lower highs. The two data streams diverge in direction. Price will eventually, usually, follow the indicator lower.
| Characteristic | Discussion |
| Price trend | Upward forming higher peaks. |
| Indicator trend | Lower peaks. |
| One month | I found that the best divergence signals in the RSI and CCI indicators are when the peaks are spaced less than 2 months apart – 1 month apart is best (daily charts only). |
| Trends | Draw a trendline along the price peaks and it should slope upward. A trendline drawn along the indicator peaks should trend downward. Don't draw trendlines along the valleys when looking for bearish divergence. |
If the price trend is up, then look for divergence among the peaks, not the valleys. When you spot divergence, recognize that the price trend may change. This doesn't mean an immediate sale, but you should be ready to flee.
Bullish divergence (see adjacent chart) occurs when price makes a lower low but the indicator forms higher lows. The two data streams diverge in direction. Price will eventually, usually, follow the indicator higher.
| Characteristic | Discussion |
| Price trend | Downward forming lower valleys. |
| Indicator trend | Higher valleys. |
| One month | I found that the best divergence signals in the RSI and CCI indicators are when the valleys are spaced less than 2 months apart – 1 month apart is best (daily charts only). |
| Trends | Draw a trendline along the price valleys and the trendline should slope downward. A trendline drawn along the indicator valleys must slope upward. Don't draw trendlines along the peaks looking for bullish divergence. |
If the price trend is down, then look for divergence among the valleys, not the peaks. When you spot divergence, recognize that the price trend may change. This doesn't mean an immediate buy, but consider taking a position soon, especially if you receive other confirming signals.
-- Thomas Bulkowski
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