Clear as mud!

Saturday, 23rd June 2012 16:52 - by Moosh

Occasionally, a trend does not have a blatant bullish divergence signal pre-empting a short-term price movement.

This can be slightly frustrating, but sometimes the picture only becomes clear once the trend is in full swing.

One such example was with Goldplat (TIDM code: GDP) at the start of 2012:

1. After the peak price at ~12.75p in November 2011, the price became oversold again by the daily slow stochastic indicator in December 2011. This continued to drop till 11th January 2012, when the daily relative strength index (RSI) went oversold.

2. Between 11th January 2012 and 31st January 2012, the price moved ~50%, from 10.125p to 15.25p. This was aided by a couple of bullish news items; with co-incident swings from oversold to overbought with RSI and the slow stochastic oscillator.

3. The 29th February 2012 peak at 15.375p gave a small bearish divergence signal - with RSI, volume, momentum, rate of change, and money flow - compared with the 31st January 2012 price peak. This led to a fall in price to under 11p in mid-May 2012. As I type, though, it may still drop further!

4. Although no obvious bullish divergence signals were apparent (and when looking for these signals they should be very obvious and the charts should not need overanalysing to determine them), a large volume day happened on 11th January 2012 before the following price rise, so it may have been that Market-Makers needed to clear the voluminous trade(s) before any price movement could proceed.