Technical analysis
How do I spot bullish and bearish divergence using momentum oscillators?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Divergence occurs when price makes a new high or low that isn't confirmed by a momentum oscillator like RSI or MACD, suggesting weakening underlying momentum and a possible upcoming reversal.
How it works
Bullish divergence appears when price makes a lower low but the oscillator makes a higher low; bearish divergence appears when price makes a higher high but the oscillator makes a lower high.
An example
A stock hitting a new high while RSI fails to exceed its prior peak can warn traders that upward momentum is fading before a price pullback.
Risk & limitations
Divergence can persist for extended periods before any reversal occurs, so it should be treated as a caution signal, not a precise timing tool.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.