Trade Stock Indices

RSI Classic Bullish Divergence and Classic Bearish Divergence Index Setups

Stock Index classic divergence is used by the Stock Index traders as a possible sign for a trend reversal. Classic stock trade divergence trade setup is used when looking and searching for an area where the price could reverse and start going in the opposite trend direction. For this reason classic divergence setup is used as a low risk entry technique & also as an accurate way to exit of a trade.

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

There are 2 kinds of common RSI divergence trading setups:

  1. Index Classic Bullish Divergence Setup
  2. Index Classic Bearish Divergence Trade Setup

Classic Stock Bullish Divergence

Traditional bullish divergence in indices arises when the price forms lower lows (LL) while the oscillator indicator charts higher lows (HL).

RSI Stock Classic Bullish Divergence and Stock Classic Bearish Divergence

Classic Stock Bullish Divergence - RSI Strategies

A classic bullish divergence in stock trading signals a potential shift in market trends from a downward to an upward direction. This occurs because, despite the price rising, the volume of sellers driving the price lower was diminished, as illustrated by the RSI. This indicates a fundamental weakness in the downward trend.

Classic bearish divergence

Classic bearish divergence in indices trading occurs when the trading price is registering a higher high (HH), but the corresponding oscillator reading is showing a lower high (LH).

Indices Classic Bearish Divergence Index with RSI Indicator Indices Strategies

Identifying Bearish Divergence Patterns in Indices Using the RSI Indicator for Strategic Trading on Indices

Classic indices bearish divergence warns of a possible change in the trend from upwards to downward. This is because even though price moved & headed higher higher the volume of buyers(bulls) that moved the price higher was less such as illustrated by RSI. This demonstrates underlying weakness of the upward trend.

Discover More Directions & Instructional Material:

Stock Index Broker