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Divergence Analysis

Figure 9.11 illustrates wave cycles or oscillations at three different wave degrees.

We observe price rising simultaneously on all three wave degrees, namely at the:

1. Lower wave degree between points P and Q, R and S, and so on


2. Next or first higher wave degree between I and II, III and IV, V and VI, and so
   on


3. Second higher wave degree between 1 and 2

It is obvious that peaks II and IV are formed from the oscillatory action at

the lower wave degree between points G and Y, indicating a rise at a higher wave

degree. As we shall see later, it is important to identify the wave degree that we are

trying to establish as confirmation or non‐confirmation, in order to tell whether

the subsequent price action is a continuation or reversal of a trend at the first or

second higher wave degree.

Figure 9.10 Cycles at a Lower Wave Degree Forming a Larger Trend.

Figure 9.11 Trends at Various Wave Degrees.