There are two types of divergences:
- Regular divergence
- Hidden divergence
Each type of divergence will contain either a bullish bias or a bearish bias.
Since you’ve all be studying hard and not been cutting class, we’ve decided to help y’all out (cause we’re nice like that) by giving you a cheat sheet to help you spot regular and hidden divergences quickly.
|Bullish||Lower Low||Higher Low||Indicates underlying strength. Bears are exhausted.Warning of possible trend direction change from downtrend to uptrend.|
|Bearish||Higher High||Lower High||Indicates underlying weakness. Bulls are exhausted.Warning of possible trend direction change from uptrend to downtrend.|
|Bullish||Higher Low||Lower Low||Indicates underlying strength. Good entry or re-entry. Occurs during retracements in an uptrend. Nice to see during price retest of previous lows. “Buy the dips”|
|Bearish||Lower High||Higher High||Indicates underlying weakness. Found during retracements in a downtrend. Nice to see during price retests of previous highs. “Sell the rallies”|
Whew! That’s quite a lot to remember, isn’t it?
You can write this all down in your palm and look back on it while trading. If you’re the type who gets sweaty palms when you’re nervous, we wouldn’t recommend this.
You can simply bookmark this page and just revisit it when you mix up those higher lows, lower highs, lower lows, and higher highs.
You don’t want to make a wild guess while coming up with a trade, do you?