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Strategies & Market Trends : CHARTS AND TA, A UNIQUE APPROACH

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To: D. K. G. who wrote (1181)	11/4/1997 10:23:00 PM
From: stan s.	Read Replies (1) of 1391

CYMI, Dennis here is a chart of CYMI and a few comments on divergences. Generally speaking a bullish divergence occurs when an indicator pulls away from a price...leading it higher as it slopes upward at a faster pace. I like to use the RSI and Chaikin A/D but you can use Stochs or CCI etc. as well. Usually it's for a specified time period...generally 14 days or so. As an example if the RSI reaches a 14 day high and the price does not, it's a bullish divergence...price should folow the RSI. Conversely if a price reaches a new 14 day high and the RSI does not (esp if it's turned down) it's a bearish divergence...the price will generaly follow the RSI down. In the case you mentioned...a fast drop in price left a very sluggish MACD in a higher posistion but with no chance to react. Not the same effect...that's the reason I generally don't use the MACD for divergences. Some of the other indicators did make their 14 day lows to correspond with the drop in price. If you were to use the MACD in that way...today would signal a bearish divergence...the MACD is at it's lowest point in 14 days while the price is not. Oh, by the way as I'm sure you know. ..a Bullish Hammer and a Long Lower Shadow today...again signaling a possible reversal. These signals against the trend are having a tough time... geocities.com Stan

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