Which is stronger or more significant - normal divergence or hidden divergence? I've been experimenting with the Commodity Channel Index as an indicator of divergence and potential reversals. Normal divergence seems to give a pretty good indication of a reversal. However sometimes it just seems to represent a slowdown and consolidation of price before another burst up or down. Then it appears the indicator was simply forming a hidden divergence demonstrating continuation of the trend.
It just seems the divergence between the price and the indicator can potentially mean a move in either direction depending how you look at it. I'll try to post some examples of what I mean if I can work out how to save and upload a few charts. But I'm sure some of you know what I mean. A zig-zag pattern on price and the indicator could mean two things depending on whether you are looking at the peaks or troughs.
Any comments?
Edited to add:
Also I'm curious about trends that occur on the CCI indicator. Sometimes it will bounce off a trend line several times as it climbs or descends. However, I'm not sure yet whether a break/continuation of such a trend line holds any significance. Does a trending CCI reveal any clues of potential price action?
It just seems the divergence between the price and the indicator can potentially mean a move in either direction depending how you look at it. I'll try to post some examples of what I mean if I can work out how to save and upload a few charts. But I'm sure some of you know what I mean. A zig-zag pattern on price and the indicator could mean two things depending on whether you are looking at the peaks or troughs.
Any comments?
Edited to add:
Also I'm curious about trends that occur on the CCI indicator. Sometimes it will bounce off a trend line several times as it climbs or descends. However, I'm not sure yet whether a break/continuation of such a trend line holds any significance. Does a trending CCI reveal any clues of potential price action?