What is Divergence?
A bearish divergence is a higher high in price with a lower high in an oscillator such as RSI or MACD; a bullish divergence is a lower low in price with a higher low in the oscillator. In market breadth, an index can make new highs while fewer stocks take part. Divergence says the move is losing pace or participation; it does not say when, or whether, the trend will reverse, and in strong trends it can appear again and again before anything turns.
Also called bearish divergence, bullish divergence, momentum divergence, breadth divergence
- Bearish divergence
- Price: higher high · indicator: lower high
- Bullish divergence
- Price: lower low · indicator: higher low
- Breadth divergence
- Index: new high · fewer stocks taking part
Not a countdown
Treat divergence as a warning that needs confirmation from price structure, volume and context, not as a reversal date.