Hi Anil,
U mean to say, to play -ve divg, we need to go to one time frame down & a close below two bars low/swing low, we will see the -ve div effect on daily chart. Could u pl show it on chart to understand it better?
When can we get confirmation that the -ve div is confirmed and we can exit long & initiate short?
Dear mangup,
No..what i said is you cant short market just bcoz negative divergences are there. You need to have confirmation from price alone, rest indicators are all derivative of price.
-ve divergences on momentum means pace of moving upwards have been slowed down it doesnt mean reversal there itself.
So what to look on price chart. It can be support/Resistance on price action points. Like if market trading near to 6300 level, and neagative divergences coming in persistently then you just cant short mkt there. You need to arrive at levels, like below 6280 it seems weakness on 5min chart based on price S/R levels, but that weakness is limited to 5min chart only, for daily charts to show weakness it needs to again break some key level to prove it for a confirmation that mkt has reversed.
What i am trying to show from 2 bar reversals is, identifying short term strength and weakness. Like in TA we learned HH-HL forms bull mkt, similarly i try to see how swing lows of 2 or 3 bars earlier figuring out.
If todays bar has broken low of previous three bars, it implies something structural change occured, it may be due to news or anything. So it will try to show weakness in short term.
YOu can also combine it with MA of your choice, or also draw trendlines on price as well on your indicator too for added confirmation.
Point is you cant short just bcoz -ve div is there. Market can push itself to such a extreme that these divergences fade, another set of rise await to hang the bears, this goes on till last of bears find suffocating to hold on their positions.
