DIVERGENCES

Quite often we talk about "positive" and "negative" divergences. Below you can see very clearly, what they are -what to look for- and what their results are.

"Price action" can be very misleading. That is why we use other indicators that help us to look under the surface. One of the best indicators we have for that purpose is the 10 day BSE. Back in April price continued to fall, yet the BSE was rising indicating that selling pressure was diminishing, thus a rally would   start soon. 

On the other hand, between May and June price was climbing while the BSE was declining, indicating that buying pressure was diminishing, thus the rally was running out of fuel, and a decline would  start soon.

Divergences help us identify points of entry of below average risk, and above average reward. Professional investors take in consideration BOTH, in making decisions.

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The Meaning of Divergences