Bullish Divergence
A bullish divergence is a chart signal where price makes lower lows while an indicator makes higher lows, hinting that selling pressure may be weakening.
Bullish divergence is a technical analysis pattern that can appear when a crypto asset’s price falls to a new low, but a momentum indicator such as the Relative Strength Index (RSI), MACD, or stochastic oscillator forms a higher low. This mismatch suggests that the downward move may be losing strength even though the price chart still looks bearish. It does not guarantee a reversal, but it can be an early warning that sellers are becoming less dominant.
Traders use bullish divergence to watch for possible trend changes, bounce setups, or areas where risk may be shifting. For example, if Bitcoin drops from $62,000 to $60,000 and later to $58,000, but RSI rises from 25 to 32 during the second low, that is a bullish divergence. Many traders look for confirmation, such as a break above a short-term resistance level, higher trading volume, or a bullish candlestick pattern, before acting on the signal.
Other terms in Technical Analysis
Bollinger Bands
A volatility indicator that plots bands around a moving average to show when a crypto asset may be unusually high, low, or entering a volatile period.
Candlestick Chart
A price chart that shows an asset’s open, high, low, and close over repeated time periods.
Fibonacci Retracement
A charting tool that marks possible support and resistance levels based on Fibonacci ratios after a price move.
MACD
A momentum indicator that compares moving averages to help traders spot possible trend changes in a crypto asset’s price.