Divergence occurs when price and the RSI disagree. In bearish divergence, price makes a higher high but RSI makes a lower high — the new price extreme came with weaker momentum. In bullish divergence, price makes a lower low while RSI makes a higher low.
Why it matters
Divergence hints that the momentum behind a move is fading even as price still pushes to a new extreme. It often precedes a pause or a pullback, and occasionally a reversal. It is one of the more genuinely forward-looking things an oscillator can show you.
Why it is only a warning
The crucial caveat: divergence can persist for a long time before price responds — a market can print several divergences and keep trending. Treat it as a reason to tighten your stops or take partial profit, not as a standalone entry to trade against a strong trend. Wait for price itself to confirm with a structure break.
- Bearish: higher high in price, lower high in RSI.
- Bullish: lower low in price, higher low in RSI.
- Signals weakening momentum, not a guaranteed reversal.
- Confirm with price action before acting; divergence can repeat.
Divergence warns that momentum is fading behind a move — a cue to manage risk, not a licence to fight a trend blindly.