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VEL divergence
An easy way to tell whether a trend is decelerating (losing momentum) is to spot disagreement between the direction of the market and direction of its own momentum. This disagreement is called "divergence" and VEL's smoothness and accuracy lends itself to a very powerful form of divergence analysis, detecting weakness without getting faked out on every bar! VEL measures the speed and direction of trending price action. VEL is much smoother than classic momentum analysis. The chart shows higher swing-highs during segment A of both the price and VEL time series. This parallel behavior suggests a continued price trend, which occurs during price segment B. However, in segment B, the swing-high is now lower in the VEL series. This divergence says the upward price action is rapidly decelerating and suggests an impending reversal. As shown, price does trend lower during the 2nd half of the chart. In segment C we see price potentially starting a new uptrend, but its divergence with VEL's lower swing-highs suggests there's no real energy to the upside, and price continues its downward movement. NOTE -- Divergence analysis is not 100% perfect. (What is?) Nonetheless, if you perform divergence analysis, why not get the best? |
The trading strategy shown
above is NOT included with the Jurik Technical Indicator Toolset.
This was shown for demonstration purposes only.
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