Ex. 2 - Final Divergence

This example has two divergences:

1. The first, shown as a blue line, is longer and lasts from Aug. 12th to Sep 4th. (Three weeks of trading data).
2. The second divergence, shown as a purple line, starts with Aug 24th and goes for about a week and a half until the same point on Sept 4th.

So far, in our previous two examples, every time the Euro rallied on weak volume it triggered a strong Dollar rally. Whatever information came on the last week of August was not sufficient enough to sustain this Euro advance. When price reaches its peak on September 4th it does so with less volume than the price and A/D peak on August 12th or for that matter, the lower price peak on Aug 24th.

The pair drops back to 1.2200 from 1.2575 in two weeks. During the first week that Euro falls, Euro bulls attempt a rally but it fails and the Dollar continues gaining. At the start of the new week, on the 9th, the Dollar gains more than 80 pips in a large red candle.

The combination of divergences is another “set up” that a technical trader could have followed, and possibly traded in the right direction during the pair’s fall.

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