Hidden Bullish and Commodity Hidden Bearish Divergence Commodities

Hidden divergence is used as a possible sign for a commodity trend continuation after the commodities price has retraced. It is a signal that the original commodity trend is resuming. This is the best setup to trade because it is in same direction as that of the continuing market trend.

Commodities Hidden Bullish Divergence

This setup happens when commodities price is forming a higher low (HL), but the oscillator (indicator) is showing a lower low (LL). To remember them easily think of them as W-shapes on Chart patterns. It occurs when there is a retracement in an upward commodities trend.

The example illustrated & explained below shows an image of this commodity setup, from the screenshot the commodities price made higher low (HL) but the technical indicator made a lower low (LL), this shows that there was a diverging signal between the commodities price and indicator. This signal shows that soon the commodity market up commodity trend is going to resume. In other words it shows this was just a retracement in an upwards commodity trend.

This confirms that a retracement move is complete and indicates underlying strength of an upward commodities trend.

Commodity Trading Hidden Bearish Divergence

This setup happens when commodities price is forming a lower high (LH), but the oscillator is showing a higher high (HH). To remember them easily think of them as M-shapes on Chart patterns. It occurs when there is a retracement in a downward commodities trend.

The example illustrated & explained below shows an image of this commodity setup, from the screenshot the commodities price made lower high (LH) but the technical indicator made a higher high (HH), this shows that there was a divergence between the commodities price & indicator. This shows that soon the commodity market down commodity trend is going to resume. In other words it shows this was just a retracement in a downward trend.

This confirms that a retracement move is complete and indicates underlying strength of a downward commodities trend.

Other popular technical indicators used are CCI indicator (CCI), Stochastic Oscillator, RSI and MACD. MACD and RSI are the best indicators.

NB: Hidden divergence is the best type to trade because it gives a signal that's in the same direction with the current market trend, thus it has a high reward to risk ratio. It provides for best possible entry.

However, a trader should combine this commodity setup with another indicator like the stochastic oscillator or moving average and buy when the commodity instrument is oversold, and sell when the commodity instrument is overbought.

Combining Hidden Divergence with Moving Average Crossover Method

A good indicator to combine these commodity setups is the moving average indicator using moving average crossover method. This will create a good trading strategy.

Moving Average Crossover Technique

In this strategy, once the signal is given, a trader will then wait for the moving average cross over method to give a buy/sell commodity signal in same direction, if there is a bullish divergence set up between the commodities price and indicator, wait for the moving average crossover system to give an upwards cross over signal, while for a bearish diverging setup wait for the moving average crossover system to give a downward bearish crossover signal.

By combining this commodity trading signal with other technical indicators this way one will avoid whipsaws when it comes to trading this commodities trading signal.

Combining with Commodities Trading Fib Retracement Levels

For this example we shall use an upward market trend. We shall use MACD indicator.

Because the hidden divergence is just a retracement in an upward commodity trend we can combine this commodity trading signal with most popular retracement tool that is the Fibonacci retracement levels. The example illustrated and explained below shows that when this commodity set-up appeared on the chart, the commodities price had just hit the 38.2% level. When commodities price tested this level, this would have been a good level to place a buy order.

Combining with Commodities Trading Fib Expansion Levels

In the commodity example above once the buy commodity trade was placed, a trader would then need to calculate where to place take profit for this trade. To do this one would need to use the Commodities Trading Fib Expansion Levels.

The Fibo expansion was drawn as shown and illustrated on the commodity chart as shown and illustrated below.

For this example there were 3 take profit areas:

Expansion Level 61.80% - 131 pips profit

Expansion Level 100.00% - 212 pips profit

Expansion Level 161.80% - 337 pips profit

From this strategy combined with Fibonacci would have provided a good strategy with a good amount of profit set using these take profit levels.