thE hAnDbook of tEchnicAL AnALySiSSuch phase divergences are regarded as stronger bearish signals. Guideline (3)
above has not been breached.
9.6.5.3 examples of intra‐Oscillator Divergence: Directional and phase
Divergence Just as for inter‐oscillator divergence, we also look for both direc-
tional and phase discrepancies in intra‐oscillator divergence. Although the oscilla-
tors are identical, the lookback period will be different. A longer lookback period
will generate slower oscillations at a higher wave degree while a shorter setting will
generate more rapid oscillations at a lower wave degree. Since the two oscillators
are of identical construction, the faster oscillations at the lower wave degree repre-
sent, in a sense, the harmonics of the larger oscillations at the higher wave degree.
This is analogous to a guitar string being plucked, where the largest wave pro-
duces the lowest note with the smaller waves producing the harmonics and higher
overtones. Figure 9.109 is a chart of spot GBPUSD displaying intra‐oscillator
divergence between a 100‐day and 10‐day price oscillator. Figure 9.110 shows
phase divergence at time lines 3 and 6. The two oscillators are synchronous at all
the other time lines indicated.
9.6.6 example of price to Market breadth Divergence
We may also employ divergence between price and market breadth indicators to
forecast potential reversals. In Figure 9.111, the two indicators plotted are the
Figure 9.108 Forecasting Reversals in Wheat via Phase Divergence.
Courtesy of Stockcharts.com