Why Do Divergences Need To Be Confirmed By Price?
Momentum And Divergence
Trading momentum requires several levels of perception.
Take a look at its divergence with price. by Martin J. Pring
It is a fact that the term momentum
is a generic one encompassing all
oscillators. It is also a fact that
there are many interpretive
principles, most of which are
common to all momentum series
in one way or another.
Divergence from price action is
a key principle.
When using momentum with
the overbought/oversold concept, I assumed that the price and
momentum peaked and troughed more or less simultaneously.
That is not often the case. Equally likely is the possibility that
the oscillator will turn ahead of the price. In this instance, the
momentum indicator graphically measures the acceleration or
deceleration of a price move.