thE hAnDbook of tEchnicAL AnALySiSespecially when the path of the data series approximates a straight line. This is
a common occurrence when viewing data on higher timeframes, which tends to
fi lter out the lower wave cycles, or when data trends strongly with little or no
retracement during the trend. Also, divergence between the data series at a lower
wave degree does not necessarily indicate divergence at a higher wave degree,
though it may signal a potential directional change.
Figure 9.20 Slope Divergence as Standard Divergence in Trends without Peak and
Trough Oscillations.
nOte
When peak and trough analysis is not available or possible, we treat and inter-
pret the directional discrepancy as standard divergence, where diverging data
series is bearish and converging data series is bullish for the main data series.This means that we must exclude reverse divergence setups when applying
slope analysis. Reverse divergence analysis in the absence of visible peaks and
troughs would introduce interpretational ambiguity. Referring to Figure 9.20 , we
observe trends with no visually apparent peak and trough oscillations. As a result,
standard divergence analysis is applied, giving us only two possible outcomes,
namely either standard bearish or standard bullish divergence.
Figure 9.21 shows the six possible combinations for standard divergence in the
absence of peaks and troughs. They are identical to those found in Figure 9.3 in boxes
(2), (3), (6), (13), (16), and (17) as well as boxes in Figure 9.28 that coincide with
standard divergence based on adjacent peak to peak and trough to trough analysis.