Bullish Divergence Explained
Bullish divergence is a technical signal traders sometimes watch for when evaluating whether downside momentum may be weakening. It occurs when price continues to fall but a momentum indicator begins to move higher instead.
This difference between price and momentum can sometimes suggest that selling pressure is fading, which may create conditions where a rebound becomes possible.
1. What causes bullish divergence?
Divergence can appear when selling pressure starts to slow down even though price has not yet turned higher. Momentum indicators measure the strength of price movement, so when they begin to improve while price still falls, traders sometimes interpret that as a shift in momentum.
2. Indicators commonly used to spot divergence
Traders often use oscillators and momentum indicators when studying divergence patterns.
These indicators can help traders compare price action with momentum behaviour, which is the key concept behind divergence analysis.
3. Why traders watch divergence
Divergence signals are not guarantees of a reversal. Instead, they are clues that the strength of the current move may be weakening.
Many traders combine divergence signals with support levels, trend structure, and price patterns to judge whether a setup looks constructive.
4. Using tools to research divergence setups
Instead of manually scanning every chart, traders often use screening tools or idea platforms to surface potential setups worth reviewing.
Use the MyStockHarbor stock pickers to explore stocks that may be showing divergence behaviour and review their charts more closely.