Trade Stock Indices

RSI Index Classic Bullish Divergence and Classic Bearish Divergence Setups

Stock Index classic divergence serves as a potential signal for a change in market direction. This classic divergence trading setup is employed when searching for an area where the price is likely to reverse and commence movement in the opposite market trajectory. For this reason, the classic divergence setup is utilized both as a low-risk entry technique and as a precise method for concluding a trade.

  • Classic divergence is a low risk method to open sell near the top or buy near the bottom of a trend, this makes the risk in your Index trades are very small relative to the potential reward.
  • Classic divergence setup is used to predict the optimum ideal point at which to exit a trade


There are 2 types of RSI Classic divergence trading patterns:

  1. Classic Bullish Divergence Trading Setup
  2. Classic Bearish Divergence Setup

Classic Bullish Divergence

Classic Index bullish divergence happens when the price makes/forms lower lows (LL), but the oscillator tool makes/forms higher lows (HL) instead.

RSI Index Classic Bullish Divergence and Classic Bearish Divergence Trading Setups - RSI Index Divergence

Classic Bullish Divergence - RSI Trading Methods

The classic bullish divergence trading pattern serves as a warning of a potential trend reversal from downward to upward. This occurs because, despite a decrease in market price, the selling volume (bears) that drove the price lower was diminished, as indicated by the RSI technical indicator. This suggests an underlying weakness in the downward trend.

Classic Bearish Divergence

A classic bearish divergence arises when the price forms a higher high (HH), but the oscillator registers a lower high (LH).

RSI Index Classic Bullish Divergence and Classic Bearish Divergence Trading Setups

Strategies for Trading Stock Indices Using Classic Bearish Divergence within the RSI Indicator

A classic bearish divergence setup warns that an uptrend might flip and start heading down. Here's why: even though the price climbed, buyers (or bulls) were running out of steam, which you can spot by checking the RSI. That weakness signals the trend could be losing power.

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