Positron Investments

Trading & Education in Options, Futures, Stocks, Forex
  • Home
  • Technical analysis
    • Technical analysis basics
    • Candlesticks patterns
  • Options
    • Options basics
    • Options strategies
    • Binary options OTC
  • Futures
    • Futures basics
  • Forex
    • Forex basics
  • Market View
  • Contact
  • el

Technical analysis basics

  • Trend
  • Support/Resistance
  • Long versus short selling
  • Support/resistance property
  • Candlesticks basics
  • Consolidation
  • How charts progress
  • Trading orders
  • Day & swing trading
  • What is leverage
  • Breakout-breakdown strategy
  • Reversal strategy
  • Loss/profits ratio
  • Volume
  • Gaps
  • Support-resistance power criteria
  • Charts are fractals
  • The 4 basic questions
  • Placement of stop orders
  • Determination of profits target
  • Risk management rules
  • Exchange traded fund (ETF)
  • Effect of market on stock prices
  • Day & swing trading algorithms
  • Set up of a breakout trade
  • Set up of a reversal trade
  • High probability trading set ups
  • Stock screeners
  • Ascending-descending-symmetrical triangles
  • Head & shoulders pattern
  • Cup and handle pattern
  • Ascending & descending channels
  • Moving averages
  • Oscillators
  • Negative & positive divergence
  • Relative strength index (RSI)
  • Bollinger bands

Negative & positive divergence

Generally, divergence is a mismatch of the price highs or lows relatively to the highs or lows of an index. It signals the weakness of an already existing trend and a potential reversal.

Negative divergence

In an uptrend when price makes to consecutive higher highs but the index makes two consecutive lower highs. This is a signal that the uptrend is weakening. In MS daily chart (below), high 2 is higher than 1, but high 4 in RSI oscillator is lower than 3, so we have a negative divergence.

Positive divergence

In a downtrend when price makes to consecutive lower lows but the index makes two consecutive higher lows. This is a signal that the downtrend is weakening. Again in MS daily chart (below), low 2 is lower than 1, but low 4 is higher than 3 in RSI oscillator, so we have a positive divergence.

 

Oscillator reversal

An alternative of a negative or positive divergence is an oscillator reversal. In the context of an uptrend, we have a negative reversal when the oscillator is reaching a new high but the price fails to do so or making a lower high. This is a sign of the beginning of a new downtrend. A positive reversal is when in a downtrend, the oscillator is reaching a new low but the price fails to do so or making a higher low. This is a sign of a new uptrend.

Oscillators reversals are in a sense the opposite of divergences, although they have the same implications and they are much more rare.

Links

  • Bloomberg.com
  • Capital.gr
  • chartmill.com
  • Finviz.com
  • Forexfactory.com
  • Freestockcharts.com
  • Yahoo Finance

Recent posts

  • Possible breakdown in Greek stock exchange
  • Application of a simple strategy in EUR/USD
  • S&P 500 runs out of fuel
  • Short term downtrend in Greek stock exchange
  • Possible upward movement in S&P 500

Blog categories

  • Day/swing trades
  • Economy/Politics
  • Trading signals
  • Trading strategies

About Positron

Curriculum vitae
Sitemap

Share

Copyright © 2018 Positron-investments.com - All rights reserved.

  • En En
  • Gr Gr