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Strategies & Market Trends : Befriend the Trend Trading -- Ignore unavailable to you. Want to Upgrade?

To: John Lee CA who wrote (4213)	6/14/1999 9:36:00 AM
From: Dr. Stoxx	Respond to of 39683

John Lee, Good questions. There are two distinct ways divergence is used. The first way confirms the readiness of a market to resume its trend, and the second signals the weariness of a market in its present trend and its readiness, potentially, to reverse. In the case of NTAP, we have the first kind of divergence. Price clearly shows a downtrend (parallel trend lines) that has, we think temporarily, rallied. The fact that price in that rally made a lower high, while Stoch. made a higher high (relative to price), indicates that the market is very ripe to begin its trend again. If NTAP were to reverse its downtrend, we would see a lower low in price, with a concurrent higher low in the oscillator (ROC is better than Stoch. at showing this). Hope that helps, TC.