Bullish Divergence
Bullish divergence is a concept in technical analysis that occurs when there is a discrepancy between the price movement of an asset and a specific technical indicator. It is often seen as a potential early signal for a bullish reversal in the price trend. In a bullish divergence scenario, there are two main components: Price Movement: The price of the asset forms a series of lower lows on the price chart; and the Technical Indicator: Simultaneously, a momentum or oscillating technical indicator (Relative Strength Index, or RSI and Moving Average Convergence Divergence, or MACD) forms a series of higher lows on its corresponding chart. This indicates that the momentum or trend-following indicator is not confirming the lower lows in the price. The bullish divergence suggests that while the price is showing weakness by making lower lows, the momentum behind the downtrend is diminishing. This can imply that the selling pressure is weakening and that a potential reversal to the upside 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
- Bearish Divergence
- Backtesting
- Ascending Triangle
- Accumulation
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- Vega
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- Central limit theorem
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