Divergence and Its Role in Reversal Trends

Every chart watcher and analyst contends with the problem of quantifying reversal. Is a strong signal a new primary trend, a secondary move, a swing trend, or only a retracement? The answer relies on taking a view of the long-term chart and estimating where the current price activity fits. For example, when you find a consistent primary trend, a short-term secondary trend is normal and expected, but it does not signal a new primary trend. For that, you need a preponderance of signals, multiple indicators all pointing to weakness in the current trend and the emergence of an opposite movement.

In this analysis, fundamentals should play a role as well. A three-year technical trend is directly affected ...

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