SubscribeMomentum Bullish Divergence
July 23rd, 2006 • Related • Filed Under
To find a bullish divergence on daily charts, we will use a 3-month charting window. You may use charts that are greater than the 3-month period, but do not try this technique when looking at charts under the given 3-month time frame. Be certain to use a 28-period momentum indicator as well. With this 28-period, each momentum length will be 1 hour each. When a divergence is found make sure that the divergence lasts at least six periods.
The steps used in finding a divergence are as follows:
- Find the lowest price low on the chart and mark it with the letter A.
- Now mark the momentum indicator with the letter B for the same time and date as point A.
- Mark the previous momentum low with a C.
- Find the price that corresponds to C and mark it with a D. You should now have a configuration which looks like the following illustration below
- Now locate the highest point between your point B and C and mark it with an E. This point is our buying point. After the stock trades further past point B do not buy until the momentum breaks past this point E.
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