We don't talk about this too much in outside of the 12WT because many traders have a hard enough time wrapping their heads around regular divergence, but here's a crystal clear example of the "Hidden Divergence" that some of you have heard me mention before.
A bit more explanation is needed when trading with divergences. Simply going long on hidden bullish or short on hidden bearish doesn't work. Look at the comments in the chart below. Divergences are nothing but corrections. Corrections are nothing but prices bouncing off Support/Resistance. Divergences fail just a support/resistance fail and this is something traders should bear in mind. What's good about this set up is the perfect confluence of a regular and a hidden divergence, which offers a lot higher probability than regular set ups.
Hidden Divergence , Bearish Divergence and Bullish Divergence is more noticeable on RSI with a setting of 14 and then to select T/H 3 , which smooths out the RSI , Refer to the Book written by John Hayden and go to page 65 and look at Chart 13 , my entire trading is based on RSI which to me is the most powerful tool in my tool box , if you want to go and break it down even further as my good friend Akil knows we used to study this Way back , you can trade simply by only watching RSI and NO PRICE , i have a trading system that works on this principal only , What Akil has shown there is 100% correct as RSI has converted from Bullish to Bearish and that is called Market Conversion , Harmonically you now have or should retrace back up above the 50 line within RSI and by doing that as soon as RSI Crosses the 30 line you Buy which the Hidden Divergence is shown on Akil's Chart .