Divergence — Momentum Fading First

The definition

Bearish divergence: price makes a HIGHER high while the momentum indicator (RSI/MACD) makes a LOWER high — each new price push needs less force. Bullish divergence: lower price low, higher indicator low — selling pressure shrinking. Divergence says the TREND's engine is weakening; it does not say when it stops.

Reliability rules

Divergences are most reliable: (1) on higher timeframes, (2) at/after extended moves, (3) at structural levels (S/R zones), and (4) when confirmed by a price trigger (e.g., trendline break). In raging trends divergence fires repeatedly and price ignores it — "divergence on divergence." Never trade it without a price-level confirmation.

The hidden divergence

The lesser-known kind: price makes a HIGHER LOW while momentum makes a LOWER low (hidden bullish) — trend-continuation, not reversal. Pros classify divergence by what it predicts: regular = reversal, hidden = continuation. Misreading the type is a classic intermediate mistake.

Sources

• DivergenceInvestopedia
• Technical Analysis for the Trading ProfessionalConstance Brown