The divergence between the price action and the momentum indicator is an early warning.
It can be used for entry confirmation. It tells us that the move is almost ready to switch to the other direction. So, we want to find an entry signal.
It can also be used as a warning for exits, telling us that the move we are currently riding might be over...
The use of Fibonacci ratio gives us even more clue and helps us to draw a pretty accurate map !
Please check the attached chart and if it is not clear, feel free to ask any questions.
All the best !
It can be used for entry confirmation. It tells us that the move is almost ready to switch to the other direction. So, we want to find an entry signal.
It can also be used as a warning for exits, telling us that the move we are currently riding might be over...
The use of Fibonacci ratio gives us even more clue and helps us to draw a pretty accurate map !
Please check the attached chart and if it is not clear, feel free to ask any questions.
All the best !