EDUCATION: Hidden Bullish Divergence

Dec 29, 2020

Today we consider very powerful technical analysis tool - the Divergence.

Definition
The divergence is a situation when the price change is not supported by the oscillator. There are four types of divergences:
1)Regular bullish - the price shows lower highs, while the oscillator shows higher lows
2)Hidden bullish - the price shows higher lows, while the oscillator shows lower lows (you can see on the chart)
3)Regular bearish - the price shows higher highs, while the oscillator shows the lower highs
4)Hidden bearish - the price shows lower highs, while the oscillator shows the higher highs

Divergence Trading Rules
Let's consider the market uptrend situation. If there is the hidden bullish divergence it means the uptrend continuation. In case of regular bearish divergence there is a high probability of trend reverse from uptrend to downtrend.

Another situation is when the market is in downtrend. The regular bullish divergence in this situation can be the evidence of trend reverse in the future. In case of hidden bearish divergence the downtrend will continue with high probability.

Indicators
You can search the divergences not only with Stochastic RSI. Other oscillators are also suites great here. For example, CCI, RSI, Volume oscillator, MACD and other.