Divergence/ Regular And Hidden Flashcards
Although divergence is not an indicator in that it is not a mathematical construct, it is often said to be a _____________ indicator.
Leading
Divergence refers to the difference in movement between an oscillating indicator, such as MACD, CCI, RSI, Stochastic, etc., and the ___________________ of the underlying financial instrument.
price action
Modern chart technicians talk of two types of divergence: ____________ divergence and ____________ divergence
Regular and Hidden
Regular divergence is the classic sense of divergence that occurs when the price action makes _____________ or _______________ while the oscillating indicator does not
higher highs or lower lows
Regular divergence indicates a weakness in the price action and an early warning that _________________________.
the trend could be coming to an end
regular divergence indicates that ___________________________ could occur though it does not indicated when this will occur.
a probable trend reversal
Regular divergence can be either ___________________ or ________________
positive (bullish) or negative (bearish).
______________ Divergence is bullish and occurs in a down trend when the price action prints lower lows that are not confirmed by the oscillating indicator.
Positive
Positive divergence indicates a ________________________ as selling is less urgent or buyers are emerging. When the oscillator __________ to confirm the lower lows on the price action, it can either makes higher lows, which is more significant, or it can make double or triple bottoms.
weakness in the down trend fails
Double or triple bottoms occur more often on oscillators, such as ____________________ that are range bound and less often on oscillators such as ____________________ that are not range bound.
RSI and Stochastics MACD and CCI
Negative Divergence (bearish divergence) occurs in an uptrend when the price action makes __________________ that are not confirmed by the oscillating indicator
higher highs
Negative divergence indicates a weakness in the uptrend as buying is ____________ and ________________ is increasing
less intense and selling or profit taking
Hidden divergence occurs when the oscillator _____________________ while the price action does not
makes a higher high or lower low
Hidden divergence tends to occur during consolidation or corrections within an existing trend and usually indicates that __________________________________________.
there is still strength in the prevailing trend and that the trend will resume
hidden divergence is akin to a ________________ pattern. As with regular divergence, hidden divergence can be bullish or bearish
continuation
___________________ Divergence occurs during a correction in an uptrend when the oscillator makes a higher high while the price action does not as it is in a correction or consolidation phase.
Bullish Hidden
Bullish hidden divergence indicates that there is _______________________ and ________________________rather than the emergence of strong selling and is thus unlikely to be last long. Thus, the uptrend can be expect to resume.
still strength in the uptrend and that the correction is merely profit taking
____________________ Divergence occurs during a reaction in a down trend when the oscillator makes a lower low while the price action _____________ as it is in a reaction or consolidation phase
Bearish Hidden does not
Hidden bearish divergence indicates that ________________ and ___________________. The reaction is merely profit taking rather than the emergence of strong buyers and is thus likely to be short lived. As a result, the down trend is more likely to resume in due time.
the selling has not waned and that that down trend is still strong
Neither regular nor hidden divergence gives clear entry signals. Instead they respectively give an indication of the of the _______________ or __________________ of the underlying trend
weakness or strength
divergence provides the probable direction of subsequent price action but does not provide ____________________. Therefore divergence can be used more effectively in conjunction with other trading techniques, such as trend lines, candlestick patterns, and moving average crossovers as a __________________ of the signals provided by those techniques, or vice versa
the entry confirmation
negative (bearish) divergence is quite significant when it occurs near or at ____________________ or ______________________.
a resistance trendline Or when combined with a bearish reversal pattern (hanging man, bear engulfing, dark cloud cover, dojo, or star) occurs in an uptrend
positive (bullish) divergence becomes quite significant when it occurs near or at ______________________ or __________________________.
a support trendline, or when a bullish reversal pattern (hammer, bull engulfing, piercing, doji, star) occurs in a down trend.
