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Using Divergences & Multiple Time Frames In Your Trading

This video discusses how to identify & incorporate bullish & bearish divergences into your trading along with the use of multiple time frames as well as the outlook for the US equity markets at this time.

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Jun 17, 2016 10:02am|Categories: Equity Market Analysis, Trading Tips|Tags: , , , |7 Comments

7 Comments

  1. GetItRiight June 17, 2016 10:43 am at 10:43 am

    Good video, educational. Thanks for that.

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    • Hanuman June 17, 2016 11:42 am at 11:42 am

      Divergences exist on the monthly chart as well as I recall. And that monthly/daily agreement seems both powerful and likely to win in the long run. The challenge is in the shorter term entry and exit points. The devil is often in the details. Randy, is this correct?

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      • rsotc June 17, 2016 2:06 pm at 2:06 pm

        Correct. The equity markets put in divergent highs on the monthly frames last year just as every single one of the diversified US stock indices (S&P 500, Nasdaq & Nasdaq 100, S&P 400 Midcap index, Russell 2000 small cap index, etc..) all had clear negative divergence put in place on the weekly charts when they topped in 2015, just as they did at the 2007 bull market top, the 2000 bull market top, etc… Those rare weekly divergent tops put in place last year play into my overall bigger picture analysis that the US stock market is most likely in a bear market that began about 1 year ago & likely has much more downside left before all is said & done.

        The good news for those adverse to shorting or limited to long-side only trades in a cash account (non-margin account, such as an IRA) is that my expectation has been & remains that this bear market will not be like that which followed the 2000 tech bubble bursting or the 2007 housing/credit bubble popping, both of which were followed by waterfall selloffs & relative swift bear markets, like the previous ’07-’09 bear which only lasted 15 months. Rather this time around, I think we’ll be looking at a series of long-drawn out cyclical bull & bear markets, similar to what Japan experienced following their credit/housing bubble implosion & the implementation of their ZIRP back in Feb of 1999. Japan created a zombie economy & now, as history often repeats, the US & Europe has done the same. Such a deflationary, slow-growth environment sucks for buy & hold investors but is ripe with opportunities for flexible & active traders that are willing to trade both long & short & move around from sector to sector, stock to stock, where ever the next opportunity presents itself.

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  2. snp June 17, 2016 12:00 pm at 12:00 pm

    really good explanation of your position using divergences. the difficulty in using them is the time periods in which they can run. 2 1/2 months is a long time to wait for a trend change! some of those run longer than that. and then there is GLD.

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    • rsotc June 17, 2016 1:28 pm at 1:28 pm

      Remember, the divergences in themselves are not a buy or sell signal. I also distinguish between potential & confirmed divergence but most importantly, I like to align divergent tops & bottom with some type of clear buy or sell signal, such as a break above or below a trendline or support/resistance shelf or some clearly bullish or bearish chart pattern. Those are your buy or sell signals & the divergence, no matter how long it took to develop, only serves to confirm the entry. The scope (duration) of the divergence helps to give you an idea of how long or powerful the new trend might be.

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  3. dan123 June 17, 2016 2:32 pm at 2:32 pm

    Great video, Thanks

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  4. joefriday June 18, 2016 6:19 pm at 6:19 pm

    Great work Randy… have to say this is the best damn site I’ve been on… although my trading style is already similar to yours, as I also primarily swing trade off divergences, etc.., among other this,… your clear, concise & easy to understand explanations of your thought process are a pleasure to read and hear on your videos. In the end you have helped my trading and made me $$. Keep up the good work!

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