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Bullish Divergence

When it comes to bullish divergence there are two bullish divergence trading setups mainly traded in the stock indexes trading market - these indices trading setups are; Indices Trading Classic Bullish Divergence and Indices Trading Hidden Bullish Divergence.


Indices Trading Classic Bullish Divergence

Classic bullish divergence setup occurs when stock indexes price is making lower lows (LL), but the oscillator is making higher lows (HL). The example explained and illustrated below shows a picture of this indices trading setup.

Indices Trading Classic Bullish Divergence Indices Trading Setup

Bullish Divergence Indices Trading



This example uses MACD indicator as a Indices divergence indicator.

From the above bullish divergence example the stock indexes price made a lower low(LL) but the indicator made a higher low(HL), this shows there is a divergence between the stock indexes price and the indicator. This signal warns of a possible indices trend reversal.


Classic bullish diverging signal warns of a possible change in the indices trend from down to up. This is because even though the stock indexes price went lower the volume of sellers that pushed the stock indexes price lower was less as illustrated by the MACD technical indicator. This indicates underlying weakness of the downward Indices trend.



Indices Trading Hidden Bullish Divergence

This bullish divergence setup happens when stock indexes price is making a higher low (HL), but the oscillator (indicator) is showing a lower low (LL). To remember them easily think of them as W-shapes on Chart patterns. It occurs when there is a retracement in an upward Indices trend.


The bullish divergence example explained and illustrated below shows an image of this indices trading setup, from the screenshot the stock indexes price made a higher low (HL) but the indicator made a lower low (LL), this shows that there was a diverging signal between the stock indexes price and indicator. This signal shows that soon the stock indexes trading market up indices trend is going to resume. In other words it shows this was just a retracement in an upward indices trend.

Indices Trading Hidden Bullish Divergence Example in Indices Trading

Indices Trading Hidden Bullish Divergence- Bullish Divergence Indices Trading


This bullish divergence confirms that a retracement move is complete and indicates underlying strength of an upward indices trend.

 

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