How Divergence was giving Adequate Warning - Adani Enterprise

Divergence has been very successful in Indicating a reversal well in advance. Of course, not all the indicated divergences resulted in successful price reversal. But Divergence on larger timeframe means at least be cautious !! Most of the traders who trade divergence combine multiple indicators for confirmation, which is fine. But in my opinion never trade against a divergence, specially if it happened in a bigger timeframe/larger timeframe.

Which indicators can be used for divergence ?

Most of the divergence indicators are based on oscillators and the idea is to find divergence between price movement in the chart vs the oscillator. Following are examples of some indicators which can be used to determine divergence:

• RSI
  
• MACD
  
• Stochastic/Stochastic RSI
  
• OBV
  
• CCI
  
• Aroon
  
• Willian %R
  

(Please let us know which indicator do you use for divergence, if it's not in the list)

My indicators are mostly based on RSI and MACD and no one needs any fancy indicators to determine divergence.

Examples of Some Divergences


ADANI GROUPS

Adani Ent (specifically) was showing an extreme divergence on daily chart recently, even much before all these controversy was on!! Please look at all the three oscillators in comparison to price chart. There were enough divergence to stay away from all the longs. Now, switch on to weekly for Adani !!!!!


(The red color change in the first divergence indicatot is noting but RSI overbought zone)

Now, tell me, wasn't there an like never before weekly divergence??? Adani was all set to burst since 19 Dec 2022 weekly candle.

NIFTY CHART - (DAILY )- BULLISH & BEARISH IN ONE CHART


Please have a look into this -


The first divergence is bullish and second one is bearish !! How beautifully captured. Now you ask, can a price reversal happen without divergences?? The answer is yes. But I would say, if there is a divergence, most likely price would move in favour or at least, if doubtful stay away !!!

The irony and the most wonderful thing about divergence, that people don't understand that, these divergences can be traded for a great risk reward ratio !!!