
Looking at the Dow daily chart this weekend I observed a major divergence in price and volume. While the Dow has been climbing higher recently, the stochastic RSI is indicating an oversold signal. Keep in mind that this is still developing. We may not see a continuation of the downtrend until early February. Divergence is simply when price movement contradicts the technical indicator of your choice. When you have a higher high in price and a lower high on your indicator, this is divergence and any combination like this where price and indicator are reading opposite of each other. Divergence found across more technical indicators the better. Learn more about divergence at Forex Project.
You can detect exhaustion in the markets with technical indicator divergence along with candlestick analysis. Steve Nison is given recognition as the founding father of candlestick studies in the Western World- a technique used for hundreds of years by the Japanese.

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Keep an eye on the Dow into early Febrary as convergence of some significant levels is approaching. While continuing to bump its head against trendline resistance, price action is contained with a downward sloping Andrew's Pitchfork, and finally a retracement possibly into the arms of a 0.618 level. All of these points near convergence in early February.

Have a good weekend.
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