I was never a squiggly line guy, studies like Average Directional Index (ADX), Bollinger Bands, Moving Average Convergence/Divergence (MACD), Moving Average Envelopes, Parabolic (SAR), Relative Strength Index (RSI) and Stochastic Oscillators can be messy.
I like “clean” studies like divergence and trend lines.
Price divergence between two plots will occur when one fails to follow the other to a new trading high or low – note the failure of the TSX Energy Index to follow crude to new highs in mid July – setting up a “sell” signal.
Now note the failure of the TSX Energy Index to follow the price of crude to new lows over the past several days and in turn setting up a “buy” signal.
Bill Carrigan
Bullish Positive Divergence for the Energy Stocks
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1 comment:
I was thinking the very same thing.
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