Another Example

This is the opposite and a negative divergence. This is the last uptrend as it topped and we went short on the top.

Here we measure the highs at 9/16 (click on the chart for a larger view) and then 9/20 makes higher highs, this is a head fake and we see it more often then not, but compare 3C at the second move, the higher high, 3C is lower then the first top. This tells us there is significantly less money in the stock even though it is making a higher high. That's why we call it the underlying action. If you weren't looking at 3C, most traders would buy the higher high, this fell about 8%, or nearly 24% for the position we were using and 24% in 2 days is a pretty decent gain.