A couple of candles later, the stochastic did make that crossover. Playing that bearish divergence would’ve been pip-tastic!
What’s the main point here? Just be patient! Don’t try to jump the gun because you don’t quite know when momentum will shift! If you aren’t patient, you might just get burned as one side keeps dominating!
Wait for indicator to move out of overbought/oversold territory.
Another trick would be to wait for momentum highs and lows to hit overbought and oversold conditions, and wait for the indicator to move out of these conditions.
The reason for doing this is similar to that of waiting for a crossover – you really don’t have any idea when momentum will begin to shift.
Let’s say you’re looking at a chart and you notice that the stochastic has formed a new low while price hasn’t.