be_chetan
Education

How to identify Hidden divergence with the help of RSI

NSE:DABUR   DABUR INDIA LTD
This example is bets suited for RSI hidden divergence.
We all know double bottom or double top RSi divergence to identify trend reversals.
But with the help of Hidden divergence we can find out trend continuation.
Lets start !!
- On 18 April stock is traded 411 and RSI shows the 51.29 reading .
- But it break the support level and fall further.
- it again renounce back to 411 level but this time RSI shows 68 levels which close to overbought region .
- At present condition we have resistance level 412 also.
- So we can Short it with the stop 412 on closing basis .

Only Condition is stock has to be in same trend Down or Up

See the Past example
Comment: One more example for better understanding.
Comment: One more Example...

Comment:
Comment: It works in either direction for Long also, See example

Comment: Trade paid off.

Please correct if I am wrong.

Divergence is when the price goes in one direction (up, down), the indicator goes in the opposite direction (down/up).
In the above case, the price seems to be equal (or more, say it reached 413.xx) and RSI seems to be moving in the same direction of price.
Where is the divergence here? I am kinda novice technical analyst, I would like to get your opinion on this. Thanks!
Reply
be_chetan innovtrader
@innovtrader, Yes, You are correct about regular divergence, but what i explained is the other way to look at the overbought and oversold levels to catch hidden divergence.

In both example price reach at the same level but indicator not , price wise levels are same but overbought levels are different.
That means, Overbought level is more than the previous one. that's the "hidden divergence"
+2 Reply
@be_chetan, Awesome. thanks for explaining! great to learn.
+1 Reply
be_chetan innovtrader
@innovtrader, only thing to take care of is the "TREND"....check Hidden divergence for the same price levels or Lower Highs.
Reply
@be_chetan, ok. I think I understood. but it will come only with practice. Let's see what DABUR does today.
Reply
be_chetan innovtrader
@innovtrader, yah sure
Reply
@be_chetan, Isn't it the same hidden divergence in VOLTAS too, at price 623 with 4hr chart?
specifically on 23rd April and 11th june (yesterday)?
Reply
be_chetan innovtrader
@innovtrader, this format requires "V" shape rallies , if stock is rising slowly by making higher low then more chance of failure of this pattern.

For more understanding i added another example of LUPIN check that.
Reply
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