When the asset price moves in the opposite direction from what a technical indicator suggests, this is known as divergence. For example, when the price on the chart has made a new higher high, but the indicator is making a lower high.
It is one of the strongest reversal signals. Divergence in technical analysis is a sign of either positive or negative price movement.
Divergence can be hidden (signals a possible trend continuation) or regular (signals a possible trend reversal). Regular bullish divergence occurs when the indicator makes higher lows while the price makes lower lows.
On the other hand, there is a regular bearish divergence if the price is making a higher high but the indicator is making a lower high.
You can find a bullish hidden divergence in an uptrend, if the price makes a higher low while the indicator makes a lower low.
In a downtrend, if the price makes a lower high while the indicator makes a higher high, is it called bearish hidden divergence.
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