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Stochastic Oscillator Bullish Stock Divergence and Bearish Divergence Stock Trading

Divergence stock trading is one of the stock trading signals that can be generated when using the stochastic oscillator stock indicator.


Divergence stock trading is a signal that a rally or retracement is losing steam and is likely to reverse. It means that the last buyers or last sellers are pushing the stocks price in one way while the majority of other stock traders have stopped trading in that direction and are cautious of a stock price correction or retracement.



There are 4 types of stocks trading divergence trading setups

Example 1: Classic Stocks Bullish Divergence


A Stock Trading Classic Bullish Divergence in the stochastic oscillator indicator and the stocks price is followed by a rise in stocks price.

Stochastic Oscillator Stock Indicator Classic Stocks Bullish Divergence

Stochastic Oscillator Stock Indicator Classic Stock Bullish Divergence


When the stocks price is making new lows the Stochastic stock indicator is not moving past its previous lows it is an indication that the downward stock trend is about to reverse and a bullish stock trading rally is likely to occur.



In the stocks trading example above the stocks price set a new low but it was not coupled with a new low in the measure of Stochastic oscillator stock indicator, when stocks price formed a new low then the stochastic stock indicator should have followed suit, but the stochastic indicator did not therefore the stock trading classic divergence trading setup.


Stock classic divergence trading setup is even stronger because there is combination of a divergence stock trade setup and then followed by a rise above the 20% indicator level. This combines the Overbought and Oversold levels with this stocks trading divergence trading setup.


Example 2: Classic Stock Bearish Divergence


A Classic Stock Bearish Divergence trading setup in the stochastic oscillator stock indicator and the stocks price is followed by a drop in stocks price.

Stochastic Oscillator Stock Indicator Classic Stocks Bearish Divergence

Stochastic Oscillator Stock Indicator Classic Stock Bearish Divergence


When stocks price is making new highs but the Stochastic oscillator stock indicator is not moving beyond its previous high it is an indication the upward stock trend will reverse and that a stock trading bearish divergence trade setup will follow.


This classic stock trading bearish divergence trade setup is even stronger because there is a combination of a stocks trading divergence with a dip below the overbought 80 level.


Example 3: Hidden Stocks Bullish Divergence


Hidden Stock Bullish Divergence trade setup signifies a retracement in an upward stocks trend. This stock trading hidden divergence trading setup is the best type of stocks trading divergence setup to trade, because you are not trading a stock price reversal, but you are trading within the direction of the Stock trend.

Stochastic Oscillator Stock Indicator Hidden Stocks Bullish Divergence

Stochastic Oscillator Stock Indicator Hidden Stock Bullish Divergence


Even though, the stochastic oscillator stock indicator made a lower low the stocks price low was higher than the previous low (higher low). This means that even though the stock sellers made a good attempt to push stocks price down as indicated by the stochastic indicator, this was not reflected on the stocks price, and the stocks price did not make a new low. This is the best place to open a buy stock trade, since it is even in an upward stock trend there is no need to wait for a confirmation stock trading signal, because you are buying in an upward Stock trend.



Example 4: Hidden Stock Bearish Divergence


Hidden Stock Bearish Divergence trading setup signifies a retracement in a downward stocks trend.

Stochastic Oscillator Stock Indicator Hidden Stocks Bearish Divergence

Stochastic Oscillator Stock Indicator Hidden Stock Bearish Divergence


Hidden stock trading bearish divergence stocks trading setup is the best type of divergence to trade, because you are not trading a stock price stock trend reversal, but you are trading within the direction of the stocks trend. This is the best place to open a sell stock trade, since it is even in a downward stock trend there is no need to wait for a confirmation stock trading signal, because you are selling in a downward Stock trend.

 

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