Divergence trading is one of the classic methods of TA and looks simple on the face of it. I did however come across a divergence failure, which i find it hard to understand.
Below is the AUDCAD daily charts with a 14 day RSI. As you can see, price makes higher high while RSI makes lower high. According to text book explanations, this sets the path for a hidden bullish divergence. However, as you can see price did make a high but immediately fell through.
Could anyone with experience shed light on this or is it a case of '....none of the methods are 100% right all the time or ... don't rely on just one indicator crap??'
Or did the top of the bullish candle (just before the bearish engulfing) was indeed the high?
Below is the AUDCAD daily charts with a 14 day RSI. As you can see, price makes higher high while RSI makes lower high. According to text book explanations, this sets the path for a hidden bullish divergence. However, as you can see price did make a high but immediately fell through.
Could anyone with experience shed light on this or is it a case of '....none of the methods are 100% right all the time or ... don't rely on just one indicator crap??'
Or did the top of the bullish candle (just before the bearish engulfing) was indeed the high?