Bullish divergence is defined as a new price bottom that has not been confirmed by a new indicator low. It signifies that the prevailing trend is weak, and is ready for reversal. Divergences are most common with momentum indicators like MACD, RSI and Stochastic.
Bullish divergences are fairly simple to identify and demonstrates that bears are losing power, and the bulls are ready to take control of the market again. Divergences are powerful technical signals, but one big drawback is that they don provide precise buy/sell signal. Consequently, it is always advisable to confirm a divergence signal with other tools like a break of support/resistance, Candlestick patterns etc.
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