Divergence occurs when the price of an asset moves in the opposite direction of a technical indicator, suggesting a potential weakening of the current trend. Bullish divergence forms when price makes lower lows while the indicator makes higher lows, signaling a possible reversal upward. Bearish divergence appears when price makes higher highs while the indicator makes lower highs, warning of a potential decline.
Example
“The RSI made a higher low while Bitcoin's price made a lower low, creating a bullish divergence that preceded a 20% rally over the following two weeks.”