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A Lesson on Intraday Triangles and Divergences

A Lesson on Intraday Triangles and Divergences

Courtesy of Corey at Afraid to Trade

The current S&P 500 60-minute structure (and SPY) gives us valuable lessons in two ascending triangle breaks and multi-swing divergences.  Let’s see what we can learn from this chart.

SPY Chart

In classic technical analysis, you are taught that ascending triangles (which there are two examples on this chart) are expected to break to the upside.

However, in today’s markets, my suggestion is to take triangles for exactly what they are – consolidation patterns as evidenced by the “Price Alternation” Principle.  Generally, a triangle breaks in the direction of the prevailing trend but doesn’t always give a tradeable edge.

The edge from triangles comes from expecting an ‘expansion’ or impluse swing/move once a clean break has occurred and trading in that direction.

We see in this example that price cleanly broke out of the triangles with gaps… and though you may have thought you were late to the party, odds favored lower prices yet to come due to the expectation for range expansion.

Moving on from triangles to divergences….

We see two examples of a ‘three push’ or multi-swing divergence as we turn the corner into July – both of which preceded tradeable price reversal swings (including this last swing up, which I mentioned as a likely course of action in last Friday’s “Idealized Trades Daily” report).

Generally, when you get a triple-swing divergence, price will form a reversal swing in the direction momentum is building.  I wanted to highlight these chart examples as lessons to you.  Each day, I share in-depth “Teaching Moments” and how to recognize trade set-ups and type of day function in my “Idealized Trades” Daily Reports, which also allows me to share my bias and expectations (along with levels to watch) in the upcoming trading day.

Corey Rosenbloom, CMT
Afraid to Trade.com

 

 


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