JoymistaWhat Is Divergence in Technical Analysis?
Divergence is a mismatch between the direction of price and a momentum indicator such as RSI: price makes a new high or low that the indicator does not confirm.
Explained
Regular bullish divergence: price makes a lower low while the indicator makes a higher low, which can point to a weakening fall. Hidden bullish: price makes a higher low while the indicator makes a lower low, which can point to the uptrend continuing. Divergence shows a change in momentum, not an entry signal by itself, so wait for price to confirm.
Example
Example with made-up numbersA first low at 100 with RSI at 25, then a second low at 95 with RSI at 32. Price made a lower low and the indicator a higher low: regular bullish divergence.
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Related terms
- RSI (Relative Strength Index)RSI is a momentum indicator that moves between 0 and 100, with a default of 14 candles;…
- MACDMACD is a momentum and trend indicator: its line is the 12-period EMA minus the 26-period…
- Market Structure: BOS and CHoCHMarket structure is the order of highs and lows: higher highs and lows in an uptrend,…
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Open in JoymistaEducational content, not investment advice.