Divergence is a very popular and powerful TA observation, and
most commonly used for the MACD and RSI. One of the educational
tops I've discussed recently is that when you have MACD divergence
but the second peak of the MACD is too far above zero -these MACD
divergences mostly fizzle out or get blown out producing only a
sideways consolidation on price vs a big sell off. Also, during
such an event, the 60 Stochastic will be embedded above 80% giving
further confirmation of a momo uptrend.
When the second peak of the MACD finally recycles closer to
zero, THAT'S the negative divergence that generally plays
out.
I mocked up these two educational charts for examples,
Educational Technical Analysis - MACD divergence and zero level
Posted by matt on 22nd of Apr 2024 at 10:53 am
Divergence is a very popular and powerful TA observation, and most commonly used for the MACD and RSI. One of the educational tops I've discussed recently is that when you have MACD divergence but the second peak of the MACD is too far above zero -these MACD divergences mostly fizzle out or get blown out producing only a sideways consolidation on price vs a big sell off. Also, during such an event, the 60 Stochastic will be embedded above 80% giving further confirmation of a momo uptrend.
When the second peak of the MACD finally recycles closer to zero, THAT'S the negative divergence that generally plays out.
I mocked up these two educational charts for examples,
DBA - Chart Link
DBA - Chart Link
$INDU - Chart Link
$INDU - Chart Link