Bullish Divergence

Bullish divergence is a technical analysis signal that suggests a downtrend may be losing momentum and an upward reversal could be approaching. It occurs when a security's price makes a lower low (or equal low) while a momentum indicator — such as RSI, MACD, Stochastic Oscillator, or the A/D Line — simultaneously makes a higher low. This positive disconnect between price action and momentum indicates that selling pressure is diminishing even though prices are still declining. In a healthy downtrend, both price and momentum indicators should make lower lows together; when momentum begins making higher lows, it signals that sellers are losing conviction and buyers may be quietly stepping in. Regular bullish divergence (price lower low, indicator higher low) signals a potential trend reversal, while hidden bullish divergence (price higher low, indicator lower low) signals trend continuation in an existing uptrend. Bullish divergences are most reliable when they occur after prolonged downtrends, at established support levels, on higher timeframes (daily or weekly charts), and when confirmed by bullish candlestick patterns, volume increases, or trendline breaks. As with all divergence signals, patience is important — the divergence may develop over several sessions before the reversal begins, and not all divergences lead to reversals.