This trade shows a classic bullish divergence setup at a previous demand level (around 20,300). Here's what happened:

The price made lower lows in the 20,200-20,300 range

Meanwhile, the oscillator indicator (purple line, likely RSI or MACD) made higher lows

This divergence occurred right at a previous demand zone (horizontal support)

A sharp bullish reversal followed, carrying price up approximately 190 pips

Divergence occurs when price movement and an indicator move in opposite directions, signaling potential reversals:

: Price makes lower lows while the indicator makes higher lows (as seen in this chart)

: Price makes higher highs while the indicator makes lower highs

Divergence works because it shows momentum weakening before price reverses. In this case, even though price was making lower lows, selling pressure was diminishing (shown by the rising indicator), suggesting bulls were preparing to take control.

Based on the chart, here's the entry criteria that likely triggered this successful trade:

: Wait for price to reach a significant support/demand zone (20,300 area)

: Verify price is making lower lows while indicator makes higher lows

: Enter when price breaks above a short-term resistance (downtrend line)

: Increased volume on the reversal candle

: Wait for a reversal candle pattern like a bullish engulfing or hammer

: Enter on the close of the confirmation candle or break of its high

In this example, the price respected the demand zone, showed bullish divergence, broke the downtrend line, and rallied strongly.



Divergence Analysis of the Trade Completed

Here's a complete divergence strategy that Stock Sniper Trading members could use:

Use 5-minute charts for intraday trading of NAS/NASDAQ

Plot two momentum indicators: RSI (14) and MACD

Identify key support/resistance zones on higher timeframes

Draw trendlines to identify price structure

Wait for price to reach a key support/resistance level

Confirm divergence between price and at least one indicator

Enter after the close of a confirmation candle that breaks the micro-trend

Place stop loss below/above the swing low/high point

Consider scaling out at 50% of target to lock in profits

Take partial profits at previous swing high/low levels

Trail stops after reaching 1:1 risk-reward

Exit completely when price reaches a major resistance/support or when divergence forms in the opposite direction

This strategy combines technical divergence signals with strong supply/demand zones, improving trade success probability and capturing moves like the 190-pip rally shown in the chart.

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