Divergence Technical Analysis in Gold Trading

Divergence technical analysis set-up is one of the gold trading signals that can be generated when using the divergence technical analysis stochastic oscillator.

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

There are 4 types of divergence setups that can be traded using this divergence technical analysis.

Example 1: XAUUSD Classic Bullish Divergence

A Bullish Divergence in the stochastic technical indicator & the xauusd trading price is followed by a rise in xauusd trading price.

stochastic divergence technical analysis

When the xauusd trading price is making new lows the stochastic divergence technical analysis is not moving past its previous lows it is an indication that the down gold trend is about to reverse & a bullish rally is likely to occur.

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

This stochastic divergence technical analysis setup is even stronger because there is combination of a divergence & then followed by a rise above the 20% level. This combines the Overbought and Oversold levels.

Example 2: Gold Classic Bearish Divergence

A Bearish Divergence in the stochastic technical indicator & the xauusd trading price is followed by a drop in xauusd trading price.

stochastic divergence technical analysis

When xauusd trading price is making new highs but the stochastic divergence technical analysis is not moving beyond its previous high it is an indication the up gold trend will reverse & that a bearish divergence will follow.

This stochastic divergence analysis setup is even stronger because there is a combination of a divergence trading signal with a dip below the over bought 80 level.

Example 3: XAUUSD Trading Hidden Bullish Divergence

This stochastic divergence technical analysis setup signifies a retracement in an upward trend. This is the best type of divergence to trade, because you are not trading a xauusd price trend reversal, but you're trading within the direction of the Gold market trend.

stochastic technical indicator divergence technical analysis

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

Example 4: Gold Hidden Bearish Divergence

This set up signifies a retracement in a downward trend.

stochastic technical indicator divergence technical analysis

This is the best type of divergence to trade with this stochastic divergence technical analysis setup, because you're not trading a xauusd price trend reversal, but you're trading within the direction of the market trend. This is best place to sell gold, since it is even in a down gold trend there is no need to wait for a confirmation trading signal, because you are selling in a downward trend.