Figure 2: Positive Divergence between Price and MFI

In Figure 2, Ouhua price reached a new low in Mar’07. However MFI recorded a higher trough in Mar’07 as compared to late 2006. This is known as a positive divergence. While many investors would like to identify the lowest low, not many succeed. With the ability of identifying a positive divergence this greatly increases one’s probability of catching a bottom.