Shadab_07

RSI Divergence - Regular & Hidden

Education
NSE:DRREDDY   DR REDDYS LABS
The price is moving in parallel channel as can be seen. So suppose once it reaches the lower line/ support, how to verify whether we can go long or we need to short. RSI Divergence comes handy here. We already have one confirmation that since price is moving in a channel and the lower line does seem to be support so it may bounce back.The next confirmation comes from RSI Divergence discussed below.

CASE STUDY 1 - RSI Positive Divergence

We observe a positive divergence in RSI opposite to negative/downward movement of price. In case of regular positive diveregnce ( where RSI moves upward making higher lows , opposite in direction to price's lower low movement , it is better to take a long position. Well that worked and the price bounced back.


Case Study 2 - RSI Hidden Divergence

Here as we see a positive hidden divergence where the price is making higher lows and the RSI is making lower lows. No that hidden divergence indicates " Trend Continuation ". So the price kept moving up and up and may move to the upper parallel line. The price may make a downward move once it reaches the upper line.

Please correct me if i am wrong.
Comment: As stated earlier the hidden divergence indicated a positive continuation trend and indeed the price moved up by 250 points i.e almost 5 %.

Will it continue or move down ?

Comments

sir 5350 CE buy last Friday so I hold or Sale because this time running loss
Reply
Shadab_07 rambhatiahcl
@rambhatiahcl, See the price is moving in an ascending manner. And the hidden divergence supports it as of now.The price may move higher on monday too as far as cuurent situation predicts. Rest it's ur call to hold the position or not .My objective of sharing above idea is to display how divergence helps in taking decision. Don't take or hold positions based on this educational content. Wish price moves in your favour and u make good profit.
Reply
Shadab_07 rambhatiahcl
@rambhatiahcl, One more thing do look up to change in Open Interest data. You will find maximum increase in call writing is for 5300 level. So as of now that is a strong resistance. So watchout.
Reply
Shadab_07 rambhatiahcl
@rambhatiahcl, what's ur position now ?
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