A Quick Lesson In Technical Analysis And MACD Divergence

Whipsaw trading can really put a damper on your portfolio, so let's take a step back right now and do a quick mini-lesson on technical analysis and MACD Divergence. After looking at charts for the past 5 days sitting on mostly all cash heading into expiration, I've noticed that the technical are flashing some important warning signs. Mainly I'm seeing a whole bunch of divergence.

And rather than bore you with chart after chart in a full length post, I decided to do another video. You can always catch HD updates on our YouTube channel.

Trading into the short Thanksgiving week should be fairly light in volume but that doesn't mean that there won't be more trading opportunities. Add your comments below and let me know your thoughts on the charts I went over and how you see the market shaking out through November.

  • william

    what parameters do you use for MACD application

    • Kirk

      Here is how I have mine set up (8,17,9) MACD Hist + 2 Lines

  • david japaridze

    Hey, do you provide actual trades you place for members to view?

    • Kirk

      @david japaridze, yes I send out alerts with traders for educational purposes only (keeping it legal here because I can't offer investment advice).

      • david japaridze

        @Kirk, Sure, that's what I meant ...

        I understand the basics of options and how they work, however my goal is to learn
        how to spot good trade setups. Do you provide tutorials or some educational material I
        can use to become a better trader? I understand successful traders use different methods
        and strategies that best suit their risk/reward appetite, but I guess I want to know
        what does it take to become one? For stocks, I have used technical analysis, and mostly
        I trade breakouts or breakdowns, but I understand options are more complicated.

      • Kirk

        Yes I do provide detailed trading alerts every week. Moreover, I think I do a good job (hopefully others will agree) on providing video updates on different techniques and market strategies for options that come about. Most recently I did a video particularly on a USO trade for members. I'm currently building a new platform that address more of what you need at the moment (see the video about it here: http://www.youtube.com/watch?v=npFjHYLaRCc). But you can always sign up and if it doesn't fit your style cancel and I'll refund you the difference.

  • Mark

    Kirk, thanks for your recent phone call. I’m looking forward to the day when I fully understand everything you are showing on these charts. I do find it fascinating. In the meantime, at least I know what I need to be learning. But I can’t help but wonder if this current volatility is with us to stay? Like worn tires that need to be changed, Europe has shown it can slap temporary patches on its economies to prevent impending blowouts. The increasingly worn tires of the U.S. economy certainly seem to make driving our markets more unpredictable. I know you don’t have a crystal ball (wish you did!), but based on your market experience, is this volatility likely to settle down any time soon or is this the new norm?

    • Kirk

      @Mark, It may seem like it's here to stay but it always calms down eventually and a trend is established. There is light!

  • Ted Longinow

    Kurt, love the post, very helpful and didn't see that coming on GLD...
    As I said on the phone, RSI works very well with trend line analysis and SLV at close yesterday broke the rising trendline giving a sell signal. Whoa, glad I took it as it really dropped today.

    My question is (both on the buy and sell side with RSI trendlines) if you bought a put yesterday afternoon it could have been sold today (or later) for a nice profit.
    What do you thnk?
    I plan to paper trade this notion, but have no idea how to set a stop loss unless I used the same signals- i.e buy call at TL break, sell call at TL break
    Buy put at trend line break and sell put at TL break.
    The whopping swings on %'s and P/L is still a bit staggering to me with options.

  • gianluca queiroli

    Hi Kirk,
    What are the most common tech indicators traders should look for or used when looking for buy or sell signals? Currently I am using macd and RSI only. Should I also look elsewhere?

    • Kirk

      @gianluca queiroli, There are thousands you could use really and it depends on your style of trading. The main ones I use are the following; MACD, STO, RSI, Acceleration Bands, Bollinger Bands, CCI.

      • gianluca queiroli

        thanks Kirk. that's helpful. Assuming we are using all of them, is there a minimum number of these whose parameters need to be met? for example, if I were to use all of them, do we consider a good set up if 4 out of 6 meet the criteria?
        Thanks again!

      • Kirk

        I don't usually do it that way. Each are good for determining different technical characteristics, but they all should be fairly similar in signals if you have a good trend/reversal in place.