What is a bearish divergence?

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by alan , in category: Stocks and Equities , 7 months ago

What is a bearish divergence?

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1 answer

by elizabeth , 7 months ago

@alan 

A bearish divergence is a technical analysis pattern that occurs when the price of an asset makes a higher high or equal high, but an oscillator indicator, such as the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD), makes a lower high or equal high. It suggests a potential reversal in the upward trend and a possible shift towards a downward trend. In simpler terms, it indicates that the buying momentum is weakening and the price may start to decline. Traders often see this as a bearish signal and may sell or take short positions.