As any divergence, the Exaggerated Divergence a divergent development of price as compared to an oscillator.
Exaggerated divergence works like a regular divergence, except that price makes double top or double bottom rather than new high or new low.
For example: In regular bullish divergence, the price makes a lower low while an oscillator makes higher low, which is the bullish signal. An exaggerated divergence would show a double bottom while an oscillator would make higher low. Double bottom by itself is bullish, which is why the divergence is seen as stronger than a regular bullish div - hence the name.
For a more advanced analysis you can also look for divergences relatively to bbands instead of in plain price terms.
- Learn about other types of divergences in the ATNET glossary page for divs.
- Get the divergence cheat sheet
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