Registered User
Joined: 8/9/2007
Posts: 10
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I am new at user and heard a lot about TSV divergence. Can someone please explain the significance of the divegence between TSV and Price? Also, are there any differences in the direction of such divergence. Thanks.
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Worden Trainer
Joined: 10/7/2004
Posts: 65,138
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The trainers cannot give settings, interpretation or investment advice. I will move this topic to the Stock and Market Talk forum where other traders are more likely to see it and comment.
You may wish to review the following:
Basic Info on BOP, TSV and MoneyStream
Using Linear Regression Sorts to Help Spot Divergences
The following is taken from the Wednesday, July 26, 2006 Worden Report:
Spotting Divergences - by Don Worden
There is no subject that I receive more questions about than divergences. It's not surprising that a lot of novices don't understand them, but many experienced technicians struggle to spot them as well. Apparently there is a gene that gives some people the ability to be good chess players, another that nurtures gifted bridge players, still another that inspires slick poker players. My guess is that it is the chess gene that propagates the spatial perception utilized in reading stock charts.
Put simply, when the indicator is trending up and the price is trending down, you have a positive divergence. And vice versa. That's a "basic divergence." There is a second type of divergence we refer to as a "leading divergence." A positive "leading divergence" occurs when the indicator is moving up faster than the price - specifically conquering previous highs, the equivalents of which the price has not yet reached. The negative version, once again, is vice-versa.
The problem is that many people have a hard time spotting these relationships in actual practice, even though they have an intellectual understanding of what a divergence is. I think I know the underlying reason for the difficulty. It is because divergent periods cover varying starting and ending points from one chart to another. The length of a period during which a divergence forms is variable. The starting points of divergent periods will vary from stock to stock. And the ending points will vary.
Further, divergent periods do not always end at the latest date. A significant divergent period may end yesterday, or last month. Divergent periods, as often as not, are nested. The untrained eye finds it difficult to pick up these nested periods. Not uncommonly, to make it even more challenging, nested divergent periods can be nested within larger divested periods.
Ideally, you should learn to eyeball a chart and spot the divergences without having to resort to trendlines or regression lines, which could make the chart look pretty complicated and confusing. This is mainly a matter of knowing what to look for - and practice. If you will follow the Worden Notes, you will see hundreds of examples over time.
But let's try an exercise in spotting a conventional positive divergence. To start with, we'll look for a stock that has been trending down for a few months. That should be easy to eyeball. Then look for the lowest point it has reached. That's easy. It requires no exceptional spatial perception. What you are interested in is determining whether a divergence existed (or exists) at that lowest point.
The price came down to that point. This we know by definition. Now go to the TSV profile. Did it also come down to that point? Or did it COME UP to that point. If it was going up before it got there, you have a positive divergence. If not, there is NO divergence.
Here is an example I ran in a commentary published in January 2003. Print out this commentary so that you can look back and forth between it and your monitor. Bring up a daily chart of HPQ with 18-bar TSV displayed in the middle window. Now, using the backslash key, cut the chart back to November 19, 1999.
First, notice that HPQ fell continually in price from early in September to almost the end of October. That should be easy enough to see. Now look for the lowest point in that downtrend. It comes near the end of October. Place the pointer there. Now look at TSV. Notice that, while the price was dropping through October, the TSV was creeping upward throughout the month. That is a positive divergence. This could have been seen anytime after that bottom was passed. But that's not the end of it.
With your pointer just past the bottom day, hit the slash to cut off the chart. Now step slowly forward using the right bracket key, one step at a time. Notice that TSV continues to show strength, climbing faster than the price. Notice finally that when you reach 11/12, another tiny, nested divergence has formed. TSV has continued to rise while price pulled back a little. This is another positive divergence.
Okay, now for an example of a "leading divergence." Bring up MEDI and cut the chart back to 4/24/06. Use a 3-day time frame. On that date I wrote a Worden Note pointing to a huge "leading divergence" to the downside. It is a "leading divergence" because MoneyStream has violated its own Q3/05 low and price has not.
Now step forward to 5/9/06, where I wrote another Worden Note. The price was rallying up to "kiss the channel goodbye"--a phenomenon that often follows a break-down from an ascending channel. The MoneyStream "leading divergence" was still in place and this represented a short-selling opportunity. -DW
-Bruce
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Registered User
Joined: 4/18/2005
Posts: 4,090
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Stukov.
If you look in the training videos there are some on finding divergences through linerar regression sorting.
quite helpfull if you are a divergence trader. also if you buy the video on TSV or Moneystream there is considerable time spent on watching a major top and bottom develop through the use of divergences. IMO monestream divergences are more significant than TSV divergences unless you get a feel for the TSV and Moneystream relationship and trust the TSV one. It's easier to find lots of TSV divergences than it is to find Moneystream ones...BUT generally speaking if Moneystream is divergent then TSV has a good chance of being divergent as well. I tend to have best results in finding multiple divergences....like TSV/MS,Stochastics, and macD .... this is a heavy consideration and I simply wait for a pretty candle entry.
hope that helps.
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