Stochastic Oscillator Bullish Trade Divergence and Bearish Divergence Energies

Divergence energies is one of the signals that can be generated when using the stochastic oscillator technical indicator.

Divergence energies is a signal that a rally or retracement is losing steam and is likely to reverse. It means that the last buyers or last sellers are pushing the price in one way while the majority of other traders have stopped trading in that direction and are cautious of a price correction or retracement.

There are four types of divergence trading setups

Example 1: Classic Energies Trade Bullish Divergence

A Energies Trading Classic Bullish Divergence in the stochastic oscillator indicator & the price is followed by a rise in price.

Stochastic Oscillator Technical Indicator Classic Energies Trading Bullish Divergence

When the price is making new lows the Stochastic indicator is not moving past its previous lows it is an indication that the downward trend is about to reverse and a bullish energies rally is likely to occur.

In the example above the price set a new low but it was not coupled with a new low in the measure of Stochastic oscillator indicator, when price formed a new low then the stochastic indicator should have followed suit, but the stochastic indicator did not therefore the energies classic divergence trading setup.

Energies Trading classic divergence trading setup is even stronger because there is combination of a divergence trade setup and then followed by a rise above the 20% indicator level. This combines the Overbought and Oversold levels with this divergence trading setup.

Example 2: Classic Energies Trade Bearish Divergence

A Classic Energies Trading Bearish Divergence trading setup in the stochastic oscillator indicator & the price is followed by a drop in price.

Stochastic Oscillator Technical Indicator Classic Energies Trade Bearish Divergence

When price is making new highs but the Stochastic oscillator indicator is not moving beyond its previous high it is an indication the upward trend will reverse and that a energies bearish divergence trade setup will follow.

This classic energies bearish divergence trade setup is even stronger because there is a combination of a divergence with a dip below the overbought 80 level.

Example 3: Hidden Trade Bullish Divergence

Hidden Energies Trading Bullish Divergence trade setup signifies a retracement in an upward trend. This energies hidden divergence trading setup is the best type of divergence setup to trade, because you aren't trading a price reversal, but you are trading within the direction of the trend.

Stochastic Oscillator Indicator Hidden Energies Trading Bullish Divergence

Even though, the stochastic oscillator indicator made a lower low the price low was higher than the previous low (higher low). This means that even though the energies sellers made a good attempt to push price down as indicated by the stochastic indicator, this wasn't reflected on the price, and the price did not make a new low. This is the best place to open a buy trade, since it's even in an upward trend there is no need to wait for a confirmation signal, because you are buying in an upward trend.

Example 4: Hidden Trade Bearish Divergence

Hidden Energies Trading Bearish Divergence trading setup signifies a retracement in a downwards trend.

Stochastic Oscillator Indicator Hidden Trade Bearish Divergence

Hidden energies bearish divergence energies setup is the best type of divergence to trade, because you aren't trading a price trend reversal, but you are trading within the direction of the trend. This is the best place to open a sell trade, since it is even in a downward trend there is no need to wait for a confirmation signal, because you are selling in a down ward trend.