Hidden Divergence
Hidden divergence is a technical analysis tool used to identify potential price reversals. It is based on the idea that when the price of an asset is making a new high or low, but the corresponding oscillator indicator is not, it is a sign that the trend is weakening and a reversal may be imminent. Hidden divergence is used to identify potential entry and exit points for trades, as well as to confirm the strength of a trend.
History of Hidden Divergence
Hidden divergence was first introduced by Charles Dow in the late 19th century. He observed that when the price of a security was making a new high or low, but the corresponding oscillator indicator was not, it was a sign that the trend was weakening and a reversal may be imminent. This observation has since been used by technical analysts to identify potential entry and exit points for trades, as well as to confirm the strength of a trend.
Comparison Table
| Price | Oscillator |
|---|---|
| Making new high | Not making new high |
| Making new low | Not making new low |
Summary
Hidden divergence is a technical analysis tool used to identify potential price reversals. It is based on the idea that when the price of an asset is making a new high or low, but the corresponding oscillator indicator is not, it is a sign that the trend is weakening and a reversal may be imminent. For more information about hidden divergence, you can visit Investopedia, TradingView, and StockCharts.
See Also
- Price Action
- Momentum
- Relative Strength Index (RSI)
- Stochastic Oscillator
- Moving Average Convergence Divergence (MACD)
- Bollinger Bands
- Fibonacci Retracement
- Support and Resistance
- Trend Lines
- Price Patterns
