Lesson T9.2 · 2 of 5 · Multiple timeframes and combining signals
Confluence in technical analysis: how to combine signals
Confluence means several independent signals pointing to the same price zone, for example an old resistance level, a moving average and a Fibonacci retracement. What matters is that the signals come from different sources. Three oscillators worked out from the same price are not three confirmations; they are close to one.
Terms in this lesson
- Support and resistance
- Prices at which a stock has often stopped falling or stopped rising.
- Correlation
- How often two investments rise and fall at the same time.
- Stop-loss
- An order that sells automatically if the price falls to a level you choose.
What is confluence in technical analysis
Definition
Confluence of signals
Several independent reasons pointing to the same price zone.
A single support level can give way easily. When an old resistance level (the lesson on support and resistance zones), a widely watched moving average (the SMA lesson) and a Fibonacci retracement (the retracements lesson) all meet in one zone, it has more reasons to matter. It does not become safe; it becomes easier to defend.
The price stalls twice at about 100.3, drops to 96.00, then rises to 108.31. The Fibonacci retracements of that rise are at 103.61 (38.2%), 102.16 (50%) and 100.70 (61.8%). The price pulls back to 100.56, where the SMA 50 is at 100.24, then climbs to about 104.5.
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Create a free accountWhy RSI, the stochastic and CCI are not independent signals
The oscillators from the T7 lessons are all calculated from the same recent prices, and each measures in its own way how hard the price has risen or fallen over the last few days. When one shows oversold, the others usually do too. Statistics has a name for this: multicollinearity, meaning several variables that are closely correlated with one another. You can add them up, but you get no new information.
| Pair of indicators | Correlation | What it means |
|---|---|---|
| Stochastic %K and CCI 20 | 0.88 | almost the same signal |
| RSI 14 and stochastic %K | 0.85 | almost the same signal |
| RSI 14 and CCI 20 | 0.72 | very similar |
| Stochastic %K and CMF 20 (volume) | 0.28 | far less related |
Our own calculation over the 111 days of the teaching series in the chart on which every indicator can be worked out. 1 means they move identically, 0 that they are unrelated. On real prices the numbers differ, but price-based oscillators stay closely linked.
A checklist before you enter
On the chart above, the price dipped into the zone to 100.56, and the next candle closed higher, at 101.13. That would be the entry.
When confluence fails
On the second chart, the same set-up: an old resistance at about 100, the SMA 50 and the 61.8% retracement in the same zone. The price dipped to 100.59, bounced for three days to 101.96, and the chart stops there.
Lessons are educational. They are not a recommendation to buy or sell. Investing involves risk and you can lose money. Sources: John Bollinger, “Bollinger Band Rules” (bollingerbands.com), rules 3 and 4; StockCharts ChartSchool, “Bollinger Bands” and “Fibonacci Retracements”, accessed 29 October 2026. The correlations are our own calculation on the teaching series. The charts are teaching diagrams, not real prices.