RSI Indicator Divergence Commodity Trading Setups

Commodity Trading Divergence is one of the trade setups used by Commodities traders. It involves looking at a chart and one more commodity technical indicator. For our example we shall use the RSI technical indicator.

To spot this divergence trading setup find two chart points at which price makes a new swing high or a new swing low but the RSI indicator does not, indicating a divergence between price & momentum.

RSI Commodity Trading Divergence Example:

In the chart below we spot two chart points, point A and point B (swing highs)

Then using RSI indicator we check the highs made by the commodity RSI technical indicator, these are highs that are directly below the commodity Chart points A and B.

We then draw one line on the chart & another line on the RSI technical indicator.

RSI Divergence Commodity Setup - Commodity Trading Divergence Commodities using RSI Technical Indicator

How to spot divergence

In order to spot this divergence setup we look for the following:

HH=Higher High- two highs but the last one is higher

LH= Lower High- 2 highs but the last one is lower

HL=Higher Low- two lows but the last one is higher

LL= Lower Low- 2 lows but the last one is lower

First let us look at the illustrations of these commodity terms

Divergence Commodities Terms Definition

Commodity Trading Divergence Commodities Terms Definition Examples

There are 2 different types of commodity divergence setups:

1. Classic Commodity Trading Divergence
2. Hidden Commodities Trading Divergence