RSI Divergence — the Early Warning System

Regular divergence (reversal)

Price higher-high + RSI lower-high = each push up costs more effort for less result: momentum fading. Price lower-low + RSI higher-low = selling exhausting. Divergence is the oscillator's most valuable signal precisely because it compares TWO pushes, revealing the trend's decay before structure breaks.

Hidden divergence (continuation)

Price higher-low + RSI lower-low (hidden bullish): the trend's pullback looks scary on price but momentum says the dip was weak — continuation. The mirror (hidden bearish) flags continuation down. Classifying regular vs hidden FIRST prevents the classic error of fading a trend on a continuation signal.

Failure modes

Divergence in a raging trend fires and fires while price ignores it — it needs a catalyst: a structure break (trendline or higher-low break) or a candle reversal AT a level. Divergence + level + trigger = trade; divergence alone = a note in your journal.

Sources

• RSI DivergenceInvestopedia
• Technical Analysis for the Trading ProfessionalConstance Brown