Hidden Bullish and Oil Hidden Bearish Divergence Crude Oil

Hidden divergence is used by traders as a possible sign for a trend continuation after the price has retraced. It's a signal that the original oil trend is resuming. This is best set up to trade because it is in same direction as that of the continuing market trend.

Oil Hidden Bullish Divergence

This setup happens when price is forming a higher low ( HL ), but the oscillator (indicator) is displaying a lower low ( LL ). To remember these setups easily think of them as W-shapes on Chart patterns. It forms when there's a price retracement in an upwards trend.

The example shown and illustrated below shows an image of this oil formation, from the image the price made higher low ( HL ) but the indicator made a lower low ( LL ), this portrays that there was a diverging trade signal between the price & indicator. This signal portrays that soon the market up oil trend is going to resume. In other words it portrays this was just a retracement in an upwards trend.

This confirms that a market price retracement move is complete & illustrates underlying momentum of an upward trend.

Oil Hidden Bearish Divergence Pattern

This setup happens when price is forming a lower high ( LH ), but the oscillator is showing a higher high ( HH ). To remember these setups easily think of them as M-shapes on Chart patterns. It forms when there's a retracement in a downward trend.

The example shown and illustrated below shows an image of this oil formation, from the image the price made lower high (LH) but the indicator made a higher high (HH), this portrays that there was a divergence between the price & the indicator. This portrays that soon the market down oil trend is going to resume. In other words it portrays this was just a retracement in a downward trend.

This confirms that a market price retracement move is complete and indicates underlying momentum of a downward trend.

Other popular technical indicators used are CCI indicator (CCI), Stochastic Oscillator, RSI and MACD. MACD & RSI are the best indicators.

NB: Hidden divergence pattern is the best type divergence pattern to trade because it gives a signal that's in the same direction with the current market price trend, thus the setup has a high reward to risk ratio. It provides for best possible entry.

However, a trader should combine this oil setup with another indicator like the stochastic oscillator or moving average & buy when the oil is oversold, and sell when the oil is overbought.

Combining Hidden Divergence Pattern with MA Crossover Strategy Method

A good technical indicator to combine these oil setups is the moving average indicator using the moving average cross-over method. This will create a good trading strategy.

Moving Average Crossover Technique

In this method, once the trading signal is given, a trader will then wait for the moving average cross over method to give a buy/sell oil signal in the same direction, if there is a bullish divergence set up between the price & indicator, wait for the moving average crossover system to give an upwards cross-over trading signal, while for a bearish diverging setup wait for the moving average crossover trading strategy to give a downward bearish crossover trading signal.

By combining this signal with other technical indicators this way a trader will avoid whip-saws when it comes to trading this signal.

Combining with Oil Trading Fib Retracement Levels

For this example we shall use an upward market trend. We shall use MACD indicator.

Because the hidden divergence setup is just a retracement in an up-ward trend we can combine this trading signal with the most popular retracement tool that is the Fib retracement levels. The example shown and illustrated below displays that when this oil set-up appeared on the chart, the price had just hit 38.2% level. When price tested this level, this would have been a good level to place a buy order.

Combining with Oil Trading Fibo Expansion Levels

In the example above once the buy oil trade was placed, a trader would then need to calculate where to put the take profit for this trade. To do this a trader would need to use the Oil Trading Fibo Expansion Levels.

The Fibo expansion was drawn as shown & illustrated on oil chart as shown & explained below.

For this example there were 3 take profit areas:

Expansion Level 61.80% - 131 pips profit

Expansion Level 100.00% - 212 pips profit

Expansion Level 161.80% - 337 pips profit

From this strategy combined with Fibo indicator would have provided a good trading strategy with a good amount of profit set using the take profit order levels.