Tuesday, August 25, 2009

For GT Blog August 26, 2009

Let us have some fun with a skill test on how to spot price divergence. Spotting divergence is a valuable asset because most analysts overlook this important signal

Divergence occurs when two lines on a chart move in opposite directions vertically. Analysts often look for divergences by comparing a stock's direction to a technical indicator or to another related stock or index. There are two kinds of divergences: positive and negative. A positive divergence occurs when the indicator moves higher while the stock is declining. A negative divergence occurs when the indicator moves lower while the stock is rising.

In all my years of teaching this is the most difficult study to explain

Question: Can you spot the "buy" signal on Talisman Energy?

(1) The divergence at A-B and 1-2?
(2) The divergence at B-C and 2-3?
(3) The divergence at C-D and 3-4?
(4) The divergence at D-E and 4-5?
(5) The divergence at E-F and 5-6?
(6) The divergence at B-G and 2-7?
If you selected 4 or 6 you would be correct - find out why on our Technical Analysis Level 1 seminar - to register http://www.gettingtechnical.com/07_seminars/index.shtml

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