Dow Intraday divergences....

Naz

Experienced member
1,391 22
Hi Chartman,

I like the divergences can you let us know what settings you're using for your MACD and RSI.
 

ChartMan

Legendary member
5,580 46
RSI 14
MACD 5,35,5
VELOCITY 11
I find that all 3 give good divergence signals, but not concurrently.....which leads to doubts. I also like velocity triangle formations as they frequently precede breakouts....some of which can be false, but verified by TCI ( see other posts on the subject, and acompanying charts.)
 

fastnet

Well-known member
305 1
Divergences, Timeframes & Reliability

Hi Chartman -

I'm currently experiencing a bit of an Alex Elder induced epiphany! - Okay, a bit strong but he has got me very excited about divergences especially of the MACD and RSI variety.

I have been reading thru a few of your historic posts. The one below is particularly impressive at the intra-day level. To be honest, your most current posts are a bit hardcore for me and fill me with a feeling that I'm trying to run before I can walk.

I wondered if you could comment briefly on your view if the reliability of divergences in today's markets. You obviously use them in conjunction with other TA principles when day-trading the DOW - however do you rate them as tools/indicators for longer term trading? Is there a time-frame that suits them best? Are RSI better than MACD or CCI?

Everything else that I have read points to MACD divergences being most effective in longer time frames. Your post below proves that they can be (in 2001 at least) just as good intra-day.

I would very much appreciate your thoughts when you get chance.

Cheers
 

ChartMan

Legendary member
5,580 46
Blimey, you've been digging deep :)
I find, currently, RSI divergences still work as well as they did 2 years ago. I don't find them in CCI very much... They also worked on longer term ( days on a 10 min chart) but the turning point was very unpredictable.
As far as the 1 min DOW is concerned, they work pretty much all of the time. Pattern recognition plays a big part and whilst I can call them 99% of the time, others still struggle. It is the small nuances that I have learnt to recognise in the DOW that allows me to call them with precision. It doesn't end there.... recently they have changed their form and recognising those that will be a pre-cursor to a reversal and those that have an underlying support and continuation element is no easy task....
In my opinion, as far as divergences goes, there is little to chose between RSI and MACD.
They tend not to work at the open , especially when the dow gaps down, ie positive divergence.
 

fastnet

Well-known member
305 1
Hi Chartman - thanks for your reply and sorry it's taken so long for me to follow up on this point - the wheels turn pretty slow when you still have a full time job to fund your eventual escape!

I'm still looking into divergences but feel I'm being held back by my tools. . . . hmmm. I'm using the daily DOW charts free with Yahoo although they only give past 5 days of intra-day action. It's also very hard to identify when the MACD has ''ticked up'' as Mr Elder would say -

The other problem I face is similar to that when using EMAs, ie the price action is amost over when the true divergence is identified. In addition to this how far do you run a divergence - 20 points? 30? It varies so much.

I'm still looking at different time scale charts and instruments - in fact the only constant is this divergence method mainly with MACD and RSI.

I just wondered whether you, or anyone else, could offer any advice over the markets that suit divergence techniques best and any way of confirming the signals given? A method of identifying the reversals i/o brief trend interuptions would be especially helpful.

I have found that divergences on longer term charts daily charts are generally more likely to signal a reversal although the genuine article (higher high with lower high on MACD that has also dipped under the zero line on last retracement) are very rare.

As always I am very grateful for any advice from this board.

Cheers,
 
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