Bullish Hidden Divergence on NQBullish hidden divergence at the Average True Range that is built-in to the Trend ATR this morning on the NQ.  This formation is a leading indication that price will move up.

Bullish Hidden Divergence on NQ

The NQ 3-minute chart below shows price flipped the ATR from red to blue and formed congestion dots (gray dots).  When the gray dots appeared, price went back and tested the ATR.  Unable to break the ATR, price moves up and breaks through the congestion dot area.  After breaking thru the congestion dots, price then comes back to retest the ATR, yet again.  This forms a higher low.  Looking down to the Stochastics, it forms a lower low.  This is known as bullish hidden divergence and is a leading indication that price will move up.  Price again comes back to the ATR and still is unable to break thru.  The ATR forms support and resistance areas which is why we use it for entries.  It is also the lowest point of risk on any trade.

Bullish Hidden Divergence on NQ

These two formations are repeated in the market day in and day out.  The first pattern, breaking the ATR and then retesting it, allows traders to see when price thru a resistance area and then retests it to ensure that the prior resistance area will support a move up.  The second formation,  bullish hidden divergence, is a leading indication that price will move up.

To learn more about support and resistance, watch the basic overview of support and resistance.

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