Hidden Divergence At Work!!!

I am back with an example of my favorite setup; Divergence. The chart below illustrates Bullish Hidden Divergence at work. Ok I am assuming that most of you know what’s Regular Divergence and what’s Hidden Divergence. The basics can be read here in my earlier post on Divergence. And since this post is about Hidden Divergence (HD), I would like to add here that HD is actually a sort of continuation pattern. It gets you in the prevailing trend.

As you can see in the chart above, that first the price made a HH and the indicators below made a LH confirming Negative Divergence (marked in red arrows) and hinted that price is ready for a breather or a pullback of sorts. This pullback resulted into a Bullish Hidden Divergence (marked in blue dashed arrows); Price making a HL and the indicators going on to make a LL. Now if we were to go long, we had quiet a few signals which made our decision easy. We had a pullback to the 50 MA which held, we had a small DB and finally we also had a Hidden Bullish Divergence. As for the entry once the price took out the lil peak between the two bottoms (plus 20 MA also took out) we had our chance to go long with a tight stop just below the DB area. As for targets, there are different techniques; some people use measure rules and some go for Fibonacci projections and than there are some who are just content into selling into the next resistance around the corner. Follow whichever suits you; YOU KNOW YOU ARE SAFE IF YOU ARE USING SOUND MONEY MANAGEMENT!!!