Stochastic Oscillator Bullish Stocks Trading Divergence and Bearish Divergence Stocks
Divergence stocks is one of the stocks signals that can be generated when using the stochastic oscillator stocks indicator.
Divergence stocks is a signal that a rally or retracement is losing steam and is likely to reverse. It means that the last buyers or last sellers are pushing the stocks price in one way while the majority of other stocks traders have stopped trading in that direction and are cautious of a stocks price correction or retracement.
There are four types of stocks divergence trading setups
Example 1: Classic Stocks Trading Bullish Divergence
A Stocks Classic Bullish Divergence in the stochastic oscillator indicator and the stocks price is followed by a rise in stocks price.
Stochastic Oscillator Stocks Indicator Classic Stocks Trading Bullish Divergence
When the stocks price is making new lows the Stochastic stocks indicator is not moving past its previous lows it is an indication that the downward stocks trend is about to reverse and a bullish stocks rally is likely to occur.
In the stocks example above the stocks price set a new low but it was not coupled with a new low in the measure of Stochastic oscillator stocks indicator, when price formed a new low then the stochastic stocks indicator should have followed suit, but the stochastic indicator did not therefore the stocks classic divergence trading setup.
Stocks Trading classic divergence trading setup is even stronger because there is combination of a divergence stocks trade setup and then followed by a rise above the 20% indicator level. This combines the Overbought and Oversold levels with this stocks divergence trading setup.
Example 2: Classic Stocks Trading Bearish Divergence
A Classic Stocks Trading Bearish Divergence trading setup in the stochastic oscillator stocks indicator and the stocks price is followed by a drop in stocks price.
Stochastic Oscillator Stocks Indicator Classic Stocks Trading Bearish Divergence
When stocks price is making new highs but the Stochastic oscillator stocks indicator is not moving beyond its previous high it is an indication the upward trend will reverse and that a stocks bearish divergence trade setup will follow.
This classic stocks bearish divergence trade setup is even stronger because there is a combination of a stocks divergence with a dip below the overbought 80 level.
Example 3: Hidden Stocks Trading Bullish Divergence
Hidden Stocks Trading Bullish Divergence trade setup signifies a retracement in an upward stock trend. This stocks hidden divergence trading setup is the best type of stocks divergence setup to trade, because you are not trading a stocks price reversal, but you are trading within the direction of the Stocks trend.
Stochastic Oscillator Stocks Indicator Hidden Stocks Trading Bullish Divergence
Even though, the stochastic oscillator stocks indicator made a lower low the stocks price low was higher than the previous low (higher low). This means that even though the stocks sellers made a good attempt to push stocks price down as indicated by the stochastic indicator, this was not reflected on the stocks price, and the stocks price did not make a new low. This is the best place to open a buy stocks trade, since it is even in an upward stocks trend there is no need to wait for a confirmation stocks signal, because you are buying in an upward stock trend.
Example 4: Hidden Stocks Trading Bearish Divergence
Hidden Stocks Trading Bearish Divergence trading setup signifies a retracement in a downward trend.
Stochastic Oscillator Stocks Indicator Hidden Stocks Trading Bearish Divergence
Hidden stocks bearish divergence stocks setup is the best type of divergence to trade, because you are not trading a stocks price trend reversal, but you are trading within the direction of the trend. This is the best place to open a sell stocks trade, since it is even in a downward trend there is no need to wait for a confirmation stocks signal, because you are selling in a downward trend.
