I cover the basis of divergences, pullbacks, throwbacks, and exhaustion spikes.
Pullbacks (red) are seen when price and indicators such as have diverged for a great length (wide divergence) or when you have weak divergence top comparing price and . Throwbacks (blue) have the same effect, however show up when you have a bottom divergence or exhaustion spike.
If you notice wide divergence tops or bottoms more than often develop a stagnant price pullback/throwback. This is important to understand for timing purposes with instruments such as options.
When you have a weak major divergence top or bottom, there is usually a strong pullback/throwback occasionally surpassing the original price top / bottom.
Exhaustion spikes often happen after strong pullbacks and pullbacks that price sideways for a long duration. Exhaustion spikes are difficult to call bottoms or tops because they can lead to large price moves. To find an exhaustion bottom it is best to look on a much smaller time frame for strong angle divergences.
For TYX I am waiting to see a rapid price movement to the downside or a divergence signal with a lower bottom in price and a rising divergence indication.
Here is an example examining an exhaustion spike using a 3 min chart with Silver ETF SLV. RSI 50 gave you an overbought signal and RSI 14 gave you divergence reading. You know the throwback is going to be weak because both RSI 50 and RSI 14 did not give you a divergence / overbought signal.
Looking at a 30 min scale, you can see both RSI 50 and RSI 14 gave you a clear divergence signal. I did expected a weak pullback, and that's what we got after the initial gap down.
Using this method I traded SLV weekly options, Jan. 30th 17.00 strike for a 1050% gain.