Divergence

In technical analysis, divergence is when the price of an asset is moving in the opposite direction of a technical indicator, such as an oscillator. Divergence is a powerful signal that can warn of a potential trend reversal.

There are two types of divergence:

• Bullish Divergence: Occurs when the price makes a new low, but the indicator makes a higher low. This can signal that the downtrend is losing momentum and a reversal to the upside may be coming.
• Bearish Divergence: Occurs when the price makes a new high, but the indicator makes a lower high. This can signal that the uptrend is losing momentum and a reversal to the downside may be coming.

Divergence is a leading indicator, meaning it can provide a signal before the price has reversed.