Hidden Bullish and Energies Trading Hidden Bearish Divergence Energies

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

Energy Trading Hidden Bullish Divergence

This setup happens when price is making 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 energies trend.

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

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

Energies Trading Hidden Bearish Divergence

This setup happens when price is making 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 trend.

The example illustrated and explained below shows an image of this energies setup, from the screenshot the energies price made lower high (LH) but the technical indicator made a higher high (HH), this shows that there was a divergence between the energies price & the indicator. This shows that soon the energies market down energies 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 energies trend.

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

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

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

Combining Hidden Divergence with Moving Average Crossover Method

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

Moving Average Crossover Method

In this strategy, once the signal is given, a trader will then wait for the moving average crossover method to give a buy/sell trading signal in the same direction, if there's a bullish divergence setup between the energies price and indicator, wait for the moving average crossover system to give an upward crossover signal, while for a bearish diverging setup wait for the moving average crossover system to give a downward bearish crossover signal.

By combining this energies signal with other technical indicators this way one will avoid whip-saws when it comes to trading this energies signal.

Combining with Energy Trading Fib Retracement Levels

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

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

Combining with Energies Trading Fib Expansion Levels

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

The Fibo expansion was drawn as illustrated and shown on energies trading chart as shown & illustrated below.

For this example there were three take profit areas:

Expansion Level 61.8% - 131 pips profit

Expansion Level 100.0% - 212 pips profit

Expansion Level 161.8% - 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 areas.