Chart of the Day -Friday, March 20th, 2020

Today’s Chart of the Day was shared on Twitter by JC Parets (@allstarcharts). As folks search for a bottom in stocks, hopeful bulls have been salivating at the sight of the bullish momentum divergences in some of the major sectors and indices. A bullish momentum divergence occurs when prices in a downtrend make a lower-low, while RSI makes a higher low. When this happens, it indicates that sellers are losing momentum and that prices could mean-revert higher. JC emphasizes the importance of being patient and waiting for price to confirm these divergences by closing above the initial low. Until that happens, these are simply potential bullish momentum divergences. JC suggests that traders consider the possibility that price does NOT confirm these potential divergences, which would be a sign that stocks could fall even further.