Divergence

Traders make transaction decisions by identifying situations of divergence, where the price of a stock and a set of relevant indicators, such as the On-Balance Volume, are moving in opposite directions. 

Divergence

Divergence occurs when the trend of price doesn't follow the trend of its indicator. 


Application of Divergence

Traders make transaction decisions by identifying situations of divergence, where the price of a stock and a set of relevant indicators, such as the On-Balance Volume, are moving in opposite directions. 

Bullish divergence:  the indicator is making a new high while the price does not. 

Bearish divergence: the indicator is making a new low while the price does not.

Illustrations of bullish and bearish divergence

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