Bearish Divergence
Bearish divergence is a concept in technical analysis that indicates a potential reversal from an ongoing bullish trend. It occurs when there is a discrepancy between the price movement of an asset and a specific technical indicator, suggesting that the bullish momentum might be weakening and a bearish reversal could be imminent. In a bearish divergence scenario, two main components are observed: Price Movement: The price of the asset forms a series of higher highs (i.e., the price reaches higher levels) on the price chart and the Technical Indicator: At the same time, a momentum or oscillating technical indicator (such as the Relative Strength Index, or RSI; or Moving Average Convergence Divergence, or MACD) forms a series of lower highs on its corresponding chart. This indicates that the momentum or trend-following indicator is not confirming the higher highs in the price. The bearish divergence suggests that even though the price is making higher highs, the momentum behind the uptrend is decreasing. This can imply that the buying pressure is waning and that a potential reversal to the downside might be on the horizon.
Related Terms
- Volume
- Uptrend
- Support
- Risk-Reward Ratio
- Reversal
- Retracement
- Resistance
- Relative Strength Index (RSI)
- Price Action
- Position Sizing
- Overbought
- Moving Average Convergence Divergence (MACD)
- Oversold
- On Balance Volume (OBV)
- Trendline
- Volume
- Uptrend
- Support
- Risk-Reward Ratio
- Reversal
- Retracement
- Resistance
- Relative Strength Index (RSI)
- Price Action
- Position Sizing
- Overbought
- Moving Average Convergence Divergence (MACD)
- Oversold
- On Balance Volume (OBV)
- Trendline
- Mean Reversion
- Moving Average (MA)
- Inverse Heads & Shoulders
- Heads & Shoulders
- Flag
- Drawdown
- Downtrend
- Double Top
- Double Bottom
- Distribution
- Descending Triangle
- Cup & Handle
- Consolidation
- Candlestick
- Breakout
- Breakdown
- Bollinger Bands
- Bullish Divergence
- Backtesting
- Ascending Triangle
- Accumulation
Most Popular Terms
Other Terms
- Automated teller machine
- Payroll deduction plan
- Operating expenses
- New fund offer
- Demand elasticity
- Interest rate risk
- Short Call
- Rho
- Put Option
- Premium
- Out of the money
- Option Chain
- Open Interest
- Long Put
- Long Call
- Intrinsic Value
- In the money
- Implied volatility
- Bull Put Spread
- Gamma
- Expiration date
- Exercise
- European Option
- Delta
- Covered Put
- Covered Call
- Call Option
- Bear Put Spread
- Bear Call Spread
- American Option
- Safe-Haven Currencies
- Lot
- Strangle
- Liquidity
- Pip
- Commodity Currencies
- Short Put
- Carry Trade
- Vega
- Underlying
- Time Value
- Time Decay
- Theta
- Currency Crosses
- Strike Price
- Straddle
- Deferred compensation
- Correlation coefficient
- Conflict theory
- Central limit theorem
Know about
Tools/Educational Resources
Markets Offered by POEMS
Read the Latest Market Journal
Weekly Updates 25/9/23 – 29/9/23
This weekly update is designed to help you stay informed and relate economic and company...
Top traded counters in August 2023
Start trading on POEMS! Open a free account here! The market at a glance: US...
Weekly Updates 18/9/23 – 22/9/23
This weekly update is designed to help you stay informed and relate economic and company...
The Merits of Dollar Cost Averaging
Have you ever seen your colleagues, friends or family members on the phone with their...
Singapore Market: Buy the Dip or Dollar-Cost Averaging?
To the uninitiated, investing in the stock market can be deemed exhilarating and challenging. The...
What are covered calls and why are they so popular?
Table of Contents Introduction Understanding Covered Calls Benefits of Covered Calls Popularity Factors Potential Drawbacks...
Why Do Bid-Ask Spread Matter in Trading?
Why Do Bid-Ask Spread Matter in Trading? The bid-ask spread is the difference between the...
Weekly Updates 11/9/23 – 15/9/23
This weekly update is designed to help you stay informed and relate economic and company...
