What is Divergence?
Divergence indicates to us that a trend is losing momentum and could be ready for a reversal or a deeper correction soon. When we see divergence, we should be cautious when trading in the direction of the trend and look for countertrend/reversal trades.
How to identify Divergence?
When the price is making lower lows, MACD (or RSI ) will show higher highs = Divergence. (Vice Versa)
We can see that we have divergence on the bigger bearish wave indicating that there’s a reversal coming soon. We also have divergence on the current 5th bearish leg, also indicating that there’s a reversal coming soon.
We are currently on the last legs of this bearish wave. Looking for one more correction for a move lower before we start the next bullrun.
Trade Idea:
– Watch for a correction for subwave iv
– Enter on break of correction with stops above that recent high
– Target: 1200, 1100
Please note that the above trade setup is a short trade. The bigger trade will be the reversal trade. Will update this chart when its ready!
See below for our last few ETHEREUM analysis.