Divergence
Price making a new high/low while a momentum indicator fails to confirm — a warning that the current move may be losing steam.
Divergence occurs when price and a momentum oscillator disagree. Bearish divergence: price makes a higher high but the indicator makes a lower high — momentum is fading on the new high. Bullish divergence: price makes a lower low but the indicator makes a higher low — selling pressure is weakening.
Divergence is a warning, not a trigger. Price can stay divergent for multiple bars before resolving. It is most reliable at key structural levels (major support/resistance, Fibonacci zones) and on higher timeframes. Divergence into thin air (no structural support) has poor follow-through.
Example
RSI on the daily chart of Gold prints lower highs (65 → 58) while price makes successive new highs. The bearish divergence, appearing right below a key resistance zone, precedes a 4% correction.
Related Terms
Confluence
The overlap of two or more independent technical signals at the same price level, strengthening the case for a trade.
IntermediateDistribution
A period where large holders are quietly selling into strength — a potential precursor to a downtrend.
AdvancedMean Reversion
The tendency of price to return toward its historical average after an extreme deviation — the foundation of counter-trend trading.
IntermediateMomentum
The rate of change of price — how fast and with what force price is moving in a given direction.
BeginnerMulti-Timeframe Analysis
The practice of reading price action across multiple timeframes to align the higher-degree trend with lower-timeframe entries.
IntermediateReversal
A sustained change in the direction of the prevailing trend, not just a temporary counter-move.
Intermediate