Difergence

Divergence is a technical analysis term that describes a situation where the price of an asset is moving in the opposite direction of a technical indicator. It can be bullish or bearish, depending on the type of divergence and the market conditions.

There are two main types of divergence: bullish divergence and bearish divergence. Bullish divergence occurs when the price of an asset is making lower lows, but the technical indicator is making higher lows. This suggests that the selling pressure is weakening, and that a potential trend reversal could be on the horizon. Conversely, bearish divergence occurs when the price of an asset is making higher highs, but the technical indicator is making lower highs. This suggests that the buying pressure is weakening, and that a potential trend reversal could be on the horizon.

Divergence can be observed in a variety of technical indicators, including the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and Stochastic Oscillator. Traders often use divergence as a signal to enter or exit a position, or to confirm other technical analysis signals.

It's worth noting that divergence is not always a reliable indicator and should be used in conjunction with other technical analysis tools and market information.

Also study