How to use Trendline-Breaks to Confirm Divergences

There is a basic Trading-Strategy that uses Divergences to find Trend-Reversals. E.g. if Price is rising while Momentum is falling, we encounter a bearish Divergence of Price vs. Momentum. To add something to the Analysis that confirms the bearish Signal, it is a popular Choice to wait for a Trendline-Break.

Although you can do this "by Hand", I will show you how to use some of my Studies to find profitable Trades.

The Studies I will be using are:

The Chart I am using for this Example is EURUSD on a 2H Timeframe - and as always: I'm using TradingView.

The Chart to the left shows a bullish Divergence of Price vs. CCI below a Trendline (TD Supply Line 1). The Trendline is calculated by connecting the TD Supply Points 1 and 2. There is an invisible Line between those points and a visible line starting with Point 2.

I encountered the Divergence because I created an Alert with CCIDivergence and saw that there was the Trendline waiting for a Trendline-Break. So I created another alert to notify me when the Trendline-Break will occur.


What happened next was that the Price of EURUSD dropped further, obviously the Trendline wasn't touched. An then a new TD Point appeared and so a new Trendline showed up (TD Supply Line 2).

A few hours later, another bullish CCIDivergence showed up below the new Trendline. Price went sideways and again nothing happened for a few hours.

But then suddenly a new TD Point appeared and initiated a third Trendline.


This third Trendline was steeper and six Hours later a qualified Trendline-Break too place and triggered the Buy-Signal.


Based on a Risk-to-Reward Ration of 1:3, the TD Lines Study calculated the Stop Loss and Take Profit Levels. Part of this Calculation is the Distance of a pre-defined Point preceding the Trendline-Break and the Trendline itself -according to Tom DeMark. 

It turned out that the Signal was accurate and the SL/ TP Levels were perfect. The next Candle after the Trendline-Break hit the Profit-Target and the Trade was closed successfully.