Divergence

There are 4 kinds of Divergences

Regular Divergence:

• Higher highs in price and lower highs in the oscillator which indicate a trend reversal from up to down.

• Lower lows in price and higher lows in the oscillator which indicate a trend reversal from down to up.

Hidden Divergence:

• Lower highs in price and higher highs in the oscillator which indicate a confirmation of the price trend which is down.

• Higher lows in price and lower lows in the oscillator which indicate a confirmation of the price trend which is up.

Divergence is a comparison of price to technical indicators. It can also be a comparison to another symbol or spread between two symbols. Divergence occurs when what you are comparing is moving in opposite directions. Divergence can signal an up coming change in trend, a change of trend in progress or that a trend should continue. A divergence signal suggests watching for a trading opportunity in the direction of the signal. Divergences may continue over many swing highs/lows so price action should confirm your trade. This can be done in many ways, some of which are: price making a higher high/low or lower high/low or price testing the last swing high/low, price trading past high or low of previous bar, many of which will correspond with the MACD histogram crossing zero.

How does a Price action confirms -ve Divergence??

Hanging Man after a rally

So evening star is out of question ...as we gapped up .
But on the charts there is a Hanging man formed after a prolonged rally which started with a hammer formed at 4588 . This hanging man is also formed at 200 sma at 5212.

Here is the day chart