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Hidden divergence setup suggests buying opportunity in BPCL

The entire bullish view negates on a breach of the immediate support zone and in the case of BPCL, we will consider Rs 355 as a stop loss level.

January 30, 2021 / 06:11 PM IST
BPCL (Image: Reuters)

BPCL (Image: Reuters)

 
 
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What is Hidden divergence?

Divergence refers to the difference in movement between an oscillating indicator, such as MACD, CCI, RSI and Stochastic and the price action of the underlying financial instrument. Hidden divergence occurs when the oscillator makes a higher high of lower low, while the price action does not. This often tends to occur during consolidation or corrections within an existing trend and usually indicates that there is still strength in the prevailing trend. In other words, hidden divergence is akin to a continuation pattern.

Why buy Bharat Petroleum Corporation ? 

Oscillators are most beneficial when a security is in a horizontal trading pattern. Oscillators move higher and lower between extreme reading that determine overbought or oversold conditions. These overbought or oversold conditions indicate probable turning points in price movement and can be used as potential entry or exit points.