RSI Reverse Bullish Divergence and Reverse Bearish Divergence Setups

Indices reverse divergence is used by traders as a possible sign for a trend reversal. Reverse divergence setup is used when looking for an area where price could reverse & begin heading in the opposite direction. For this reason indices reverse divergence is used as a low risk entry method and also as an accurate way of exit out of a trade.

• Reverse divergence is a low risk method to sell near the top or buy near the bottom of a market trend, this makes the risk on your stock trades are very small relative to the potential reward.

• Reverse divergence is used to predict the optimum point at which to exit a trade

There are two types of RSI Reverse divergence setups:

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

Reverse Stock Bullish Divergence

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

Reverse Bullish Divergence - What is RSI Reverse Divergence?

Reverse RSI bullish divergence warns of a possible reversal in the market trend from down to up. This is because even though the price went lower the volume of sellers who pushed the prices lower was less as indicated by the RSI indicator. This signals underlying weakness of the downward trend.

Reverse bearish divergence

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

What's RSI Reverse Divergence? - RSI Reverse Bullish Divergence and RSI Reverse Bearish Divergence

RSI reverse bearish divergence warns of a possible reversal in the trend from up to down. This is because even though the price went higher the volume of buyers that pushed the price higher was less as indicated by the RSI indicator. This signals underlying weakness of the upward trend.