Stochastic Oscillator Bullish Oil Trading Divergence and Bearish Divergence Oil

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

Divergence oil 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 crude crude oil price in one way while the majority of other oil traders have stopped trading in that direction and are cautious of a crude oil price correction or retracement.

There are 4 types of oil divergence trading setups

Example 1: Classic Oil Trading Bullish Divergence

A Oil Trading Classic Bullish Divergence in the stochastic oscillator indicator and the crude crude oil price is followed by a rise in crude oil price.

Stochastic Oscillator Oil Indicator Classic Oil Bullish Divergence

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

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

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

Example 2: Classic Oil Bearish Divergence

A Classic Oil Trading Bearish Divergence trading setup in the stochastic oscillator oil indicator and the crude crude oil price is followed by a drop in crude oil price.

Stochastic Oscillator Oil Indicator Classic Oil Trading Bearish Divergence

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

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

Example 3: Hidden Oil Trading Bullish Divergence

Hidden Oil Trading Bullish Divergence trade setup signifies a retracement in an upward crude oil trend. This oil hidden divergence trading setup is the best type of oil divergence setup to trade, because you are not trading a crude oil price reversal, but you are trading within the direction of the Oil trend.

Stochastic Oscillator Oil Indicator Hidden Oil Bullish Divergence

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

Example 4: Hidden Oil Bearish Divergence

Hidden Oil Trading Bearish Divergence trading setup signifies a retracement in a downward crude oil trend.

Stochastic Oscillator Oil Indicator Hidden Oil Trading Bearish Divergence

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