Oscillate The Right Way: Revisited

For all the basic stuff that I am using in this post, you will have to visit the following idea. This post is in continuation of SBI weekly divergence study..

Abbv . used:
Overbought -- OB
Oversold -- OS
Divergence -- Div

A-- OB
B-- Div after OB at A
C-- Double top and Div
Multi week correction back to support

D-- OS at support and very sharp rally due to news
E-- OB in the same news candle
Multiweek correction back to support

F-- OS and Div at support
Multiweek rally to previous highs

G-- OB
H-- Div
Price still rallied and made new highs
Later a very sharp fall back to support

I-- OS
J-- Div at support
Price rallied sharply to the high of point E

K-- OB
L-- Div
At L we have similar condition as we had at E. These conditions may pull the price back to the high of E at around 350 to find some support.

Some observations:
# Div not always lead to an immediate fall. Once it is OB/OS conditions, one may have to look for div trades on lower timeframes like daily.
# One should not force trades and let the price take its course of action and reveal hands (eg at H)
# Price action at lower timeframes should be given equal importance.
# Div after OB/OS conditions works great.
# Sharp rallies which take old highs in just one or two weeks plus OB conditions means caution. Same is true for sharp falls.
# Div trades look very simple in the hindsight but as per my experience they are not that easy to trade in the live market.

I hope this will add to your knowledge.


Hello, Great observations ,thanks for sharing & my only Q is why Stoch & not RSI divergence ...whats the advantange of Stoch Vis-a-Vis RSI ...or we can easily replace Stoch with RSI ?
+1 Reply
Bravetotrade northguleria
@northguleria, Stochastics measures the price momentum whereas Stochastics rsi measures the momentum of rsi.
That's why.
what an awesome analysis !
The only difficulty I face in divergence trades is the entry point.
+1 Reply
@raharora, Enter through price action.
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