thE hAnDbook of tEchnicAL AnALySiSFigure 9.86 Price Confi rmation of Standard Bearish Divergence via Support Breakouts.
Source: MetaTrader 4
9.4.1 price Confi rmation in Contiguous Divergent setups
and Follow‐through
Sometimes, price oscillates continuously between divergent setups. A continuous
sequence of divergent setups may appear to yield simultaneous bullish and bearish
signals. In technical analysis, bullish and bearish signals occurring simultaneously
are normally regarded as confl icting signals and are therefore largely non‐actionable
by market participants. However, signal confl icts in divergent setups are poten-
tially actionable. Actionable, with respect to divergent setups, means the ability to
initiate a trade based on price confi rmation.
nOte
Although the divergent signals may confl ict, it does not preclude the possibil-
ity of price confi rmation.Consequently, signal confl ict does not necessarily preclude participatory ac-
tion. The confl icting signal overlap only occurs at a higher wave degree and does
not affect trading opportunities if we seek price confi rmation at a lower wave
degree, where traders can potentially take advantage of such setups. Figure 9.87
depicts an apparent area of overlapping bullish and bearish signals at the higher
wave degree.
Although the overlap exists at the higher wave degree, this does not prevent
it from being a tradable setup. Once a divergent setup has been identifi ed at the
higher wave degree, the trader may initiate a trade once price has confi rmed the