Divergence Many indicators tend to imitate the peaks and troughs on the price chart with a series of similar highs and lows. Divergence occurs when the indicator fails to imitate the pattern on the price chart, a sign of trend weakness and likely reversal. Failure Swings Failure swings, in overbought or oversold territory, signal that a trend is weakening and likely to reverse. To complete the failure swing the indicator must then rise above the intervening peak. To complete the failure swing the indicator must then fall below the intervening trough. This pattern of highs and lows is identical to a trend reversal on a price chart.
Triple Divergence A triple divergence only occurs where a divergence has given an incorrect signal. How Good Is Your Market Analysis? Trading and the Economy, as well as new software updates. Identify top-performing stocks using proprietary Twiggs Money Flow, Twiggs Momentum and powerful stock screens. Protect your capital with money management and trailing stop losses. Download Incredible Charts and receive a 30-day FREE TRIAL of our Premium Service.