SPY: Powerful Divergences Intraday

Monay was a great example to highlight the “Divergences” principle about how the can call key turning points intraday which provide excellent low-risk, high-probability opportunities.  Let’s see some of these as they unfolded on July 20th.

(Please click for full-sized large image)

We had some super-divergences today, including (at least) two examples of the “Three Push” pattern along with dual TICK and 3/10 Oscillator divergences.

As I highlighted in my presentation with FuturePath Trading (”Best Trades Using Structure, Momentum, and TICK), ‘three-push’ patterns (complete with both 3/10 and TICK divergences) yield some of the BEST trading opportunities intraday.

We began with a gap and then progressed in a 5-wave decline into new lows on the day, which happened to form a ‘three push’ 3/10 Oscillator divergence and a single-swing clear TICK positive divergence.  You would place your stop just beneath the day’s low and play for a true trend reversal (which materialized).

You would exit this initial position at the mid-day highs when we formed a counter-three-push pattern reversal complete with three-swing 3/10 Oscillator Divergence and a rare triple-swing negative TICK divergence.  This was a powerful spot to exit your morning trade and put on a short afternoon trade.

This short trade was exited as we formed another 5-wave pattern (not shown) into yet another positive momentum (but this time, not TICK) divergence as the market reversed back up and continued higher on the day.

I felt this day should be a reference/lesson in divergences and trading tactics.

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Comment by Neil

2009-08-05 03:00:10

Hi,

How do I find out about these indicators that are used for divergence and how to use them.

Many thanks, Neil.

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