Regular Divergence

Regular divergence

Regular divergences are reversal patterns. Divergences are formed when price and a momentum indicator moves in different directions. Normally I use RSI to find divergences. But MACD, Stochastic etc also give good signals for trading. These pattern gives a signal before reversal starts. Probability of reversal increases in higher time frames. 

There are two types of regular divergence. 

• Regular bullish divergence
• Regular bearish divergence

Regular bullish divergence

Regular bullish divergences are seen at end of a down trend. Here a divergence between price and momentum indicator can be seen. Price forms a lower low. But indicator forms a higher low.

In the image above you can see price made a lower low, but rsi was forming a higher low. Soon price trend reversed.

Regular bearish divergence

Regular bearish divergences are seen at end of an up trend. Here a divergence between price and momentum indicator can be seen. Price forms a higher high.. But indicator forms a lower high.

In the above image you can see even though price made a higher high momentum indicator RSI made a lower high. Soon price reversed from its uptrend.

You can see below video from our channel share market malayalam for more info.

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Check post about hidden divergence here : Hidden Divergence