Indices Divergence Example

Divergence trading has two setups and these are bullish & bearish divergence setups. For each of these trading setups there is also classic divergence and hidden divergence, these trading setups are explained below.

RSI indicator is one of the oftenly used divergence indicator. This indicator is an oscillator similar to the RSI & it can be used to trade divergence trading setups just the same way as the RSI indicator.

RSI Divergence Example

RSI Indicator Divergence Example

RSI Bullish Divergence Example

Classic RSI Bullish Stock Divergence Setup

RSI classic bullish divergence occurs when stock trading price is making lower lows (LL), but the RSI indicator is making higher lows (HL).

RSI Divergence Examples

RSI classic bullish divergence setup warns of a possible change in the trend from downwards to upwards. This is because even though the price moved lower the volume of sellers that moved trading price lower was less as illustrated and displayed by RSI. This is an indicator of the underlying weakness of the down-ward trend.

Hidden RSI Bullish Indices Divergence Setup

Forms when stock price is making a higher low (HL), but the RSI indicator is showing a lower low (LL).

RSI hidden bullish divergence occurs when there's a retracement in an up wards trend.

Indices Hidden Bullish Divergence - RSI Divergence Examples

This divergence example set-up confirms that a retracement move is exhausted. This RSI divergence setup shows underlying strength of an upwards trend.

RSI Bearish Divergence Example

Hidden RSI Bearish Stock Divergence Setup

Forms when stocks trading price is making a lower high ( LH ), but oscillator indicator is showing a higher high ( HH ).

Hidden bearish divergence set-up forms when there is a retracement in a down-wards trend.

Indices Hidden Bearish Divergence - RSI Divergence Examples

This divergence example set-up confirms that a retracement move is exhausted. This divergence indicates underlying strength of a downwards trend.

RSI Classic bearish Stock Divergence Trading Setup

RSI classic bearish divergence occurs when stock price is making a higher high (HH), but the RSI technical indicator is lower high (LH).

Indices Classic Bearish Divergence - RSI Divergence Examples

RSI Classic bearish divergence signals a possible shift in trend from upward to downwards. This is because even though the price moved higher the volume of buyers that moved trading price higher was less as illustrated and shown by the RSI indicator. This is an indicator of the underlying weakness of the up-ward trend.