The principle of confirmation is one of the common themes run­ning throughout the entire subject of market analysis, and is used in conjunction with its counterpart—divergence. We'll introduce both concepts here and explain their meaning, but we'll return to them again and again throughout the book because their impact is so important. We're discussing confirmation here in the context of chart patterns, but it applies to virtually every aspect of technical analysis. Confirmation refers to the comparison of all technical sig­nals and indicators to ensure that most of those indicators are pointing in the same direction and are confirming one another.
Divergence is the opposite of confirmation and refers to a situation where different technical indicators fail to confirm one another. While it is being used here in a negative sense, diver­gence is a valuable concept in market analysis, and one of the best early warning signals of impending trend reversals. We'll discuss the principle of divergence at greater length in Chapter 10, "Oscillators and Contrary Opinion."