How to trade false divergences?

[normandysr2]

So I have a graph here of a stock (BAX) that was ranging for a good part for several months until mid July 2006 when it took off. The first MACD divergence seems to have been correct in predicting the dip at around December 2006, but then the stock continued to go in an uptrend, and this was only shown by the MACD in hindsight....So how do you trade false divergences like this where the MACD dips well below the 0 line and then shoots right back up?

 

[malaguti]

So I have a graph here of a stock (BAX) that was ranging for a good part for several months until mid July 2006 when it took off. The first MACD divergence seems to have been correct in predicting the dip at around December 2006, but then the stock continued to go in an uptrend, and this was only shown by the MACD in hindsight....So how do you trade false divergences like this where the MACD dips well below the 0 line and then shoots right back up?

the macd can diverge for ages. to trade it, you would have to wait for a confirmation that the divergence was now "kicking in". a break of a higher low for example. but then, you didn't really need a macd to diverge to trade that.
the trend continuation was easily spotted by the inverse head and shoulders, again, you didn't need a macd to spot that either

so in fact, you didn't need the macd at all..there's a clue in there somehwere

 

[normandysr2]

the macd can diverge for ages. to trade it, you would have to wait for a confirmation that the divergence was now "kicking in". a break of a higher low for example. but then, you didn't really need a macd to diverge to trade that.
the trend continuation was easily spotted by the inverse head and shoulders, again, you didn't need a macd to spot that either

so in fact, you didn't need the macd at all..there's a clue in there somehwere

I'm probably blind to see it, but where did you spot the inverse head and shoulders? Can you highlight it on the chart?

 

[malaguti]

I'm probably blind to see it, but where did you spot the inverse head and shoulders? Can you highlight it on the chart?

of course...