Bullish and bearish divergence
Price and an indicator disagreeing about the trend's strength.
Technical indicators
What is Bullish and bearish divergence?
A divergence occurs when price makes a new swing high or low but a momentum or volume indicator does not confirm it. A bearish divergence is price making a higher high while RSI makes a lower high: the rally is continuing on weaker momentum. A bullish divergence is the mirror image at lows. Divergences do not time reversals precisely, but they flag trends that are losing force.
Formula
Bearish: price swing high₂ > high₁ AND indicator at high₂ < indicator at high₁
Bullish: price swing low₂ < low₁ AND indicator at low₂ > indicator at low₁
(Our scan checks RSI, MACD, OBV, MFI and Stochastic over the last 60 sessions.)
How to read it
- Divergence on several indicators at once is stronger evidence than on one.
- Bullish divergences near a known support level are the classic reversal setup.
- In strong trends divergences can persist for a long time; wait for price to confirm with a break of structure.
Common mistakes
- Trading a divergence against a strong trend without waiting for price confirmation.
Use it on Flash Finance
Related concepts
RSI (Relative Strength Index)A 0-100 momentum oscillator: how strong recent up-moves are compared with down-moves.MACD (Moving Average Convergence Divergence)Trend-following momentum from the gap between a fast and a slow moving average.Support and resistancePrice zones where buying (support) or selling (resistance) has repeatedly stepped in.
