Divergence Analysis
9.2.1 Concept of Confi rmation in Divergence analysis
The terms confi rmation , non‐confi rmation , and price confi rmation are used in
very specifi c ways when dealing with divergence:
■Confi rmation and Non‐Confi rmation are used to describe whether the main
and its supporting data series are in directional agreement with each other or
otherwise, respectively.
■Price confi rmation (applicable and relevant only to the main data series) re-
lates to some qualifying action in price that subsequently establishes or con-
fi rms the validity of an initial bullish or bearish divergent setup, by way of
penetration of some price barrier.nOte
Confi rmation exists when the main and supporting data series are in agree-
ment with each other at the same wave degree.Being in agreement:■ Means that the successive peaks and troughs in the supporting data series are
moving in the same general direction with the peaks and troughs in the main
data series at the same wave degree
■ Implies a continuation of the current larger trend (i.e., current trend at the next
higher wave degree to the oscillations that formed the peaks and troughs).Agreement may also be represented by the slopes of the data series pointing
in the same general direction, that is, either up or down, especially when peak and
trough analysis is not available or possible. The oscillators and indicators in the sup-
porting data series indicate the potential for further price extension or momentum
in the direction of the current larger trend or direction of motion. See Figure 9.4 for
confi rmation via adjacent peak to peak and trough to trough analysis.Figure 9.4 Confi rmation via Adjacent Peak to Peak (Left) and Trough to Trough
(Right) Analysis Indicating Agreement between Price and Oscillator.