Oscillator Divergence and

Fibonacci Retracement
Types of Divergences
Regular:

● Can be either bullish or bearish

● Usually indicative of an impending trend change

Hidden:

● Can be either bullish or bearish

● Usually signals continuation in a set direction

WARNING : DIVERGENCES ARE NOT A BUY OR SELL SIGNAL, WAIT FOR THE UNDERLYING TREND
TO BREAK TO CONFIRM THE DIVERGENCE
Regular Divergence
Bullish Criteria :

1. Lower low on price of security, higher high on oscillator of choice

2. Usually indicates strength from the bulls and exhaustion from the bears
3. Wait for buyers volume to confirm price action

Bearish Criteria:

1. Higher high on price of security, lower low on oscillator of choice

2. Usually indicates weakness from the bulls and strength from the bears
3. Wait for sellers volume to confirm price action
Bullish Regular Divergence Example (AAPL)
Bearish Regular Divergence Example (AAPL)
Hidden Divergence
Bullish Criteria:

1. Higher low on price of security, lower low on oscillator of choice

2. Usually indicates continuation to the upside
3. Wait for buyers volume to confirm price action

Bearish Criteria:

1. Lower high on price of security, higher high on oscillator of choice

2. Usually indicates continued movement to the downside
3. Wait for sellers volume to confirm price action
Bullish Hidden Divergence Example (AMZN)
Bearish Hidden Divergence Example (GOOGL)
Fibonacci Retracements
How to draw for a correction:

1. Drag tool from the bottom of the current trend to the top
2. If it breaks below the 0.618-0.65 with no follow through, then the trend is weakening

How to draw for a retracement:

1. Drag tool from the top of a trend to the bottom to get retrace targets
2. If it breaks above the 0.618-0.65 with follow through, then the trend is strengthening
Most Important Fibonacci Ratios
Common Retrace Zone :

1. Anywhere in the range of 0.382-0.618 is considered common retraces for either a retracement or a
correction

Golden Zone :

1. Anywhere in the range of 0.618-0.65 is considered the golden zone, this is arguably the MOST
important fibonacci ratio.
2. Usually lines up with major resistances and supports, which shows the market geometry and
algorithms at work
3. If you choose to use the 0.65 as a stop loss, it is a common practice for the algos to puncture this
level to liquidate any stops in that range
Example of a Perfect .618 Bounce (CRON)
Buying Opportunities Using Fibonacci
Golden Zone:

1. After bouncing from the 0 .618-0.65 range in a correction, your first price target for the security
would be the 0.382. This is called a 1:1 bounce play because 0.618+0.382 = 1

Common Retraces:

1. After bouncing from the 0.382-0.618 range in a correction, your first price target for the security
would be the -0.236. If this level is broken, the next targets are the -0.382 and the -0.618.
Example of Fibonacci for a Retracement (CRON)
Example of Fibonacci for a Correction (SPY)