Divergence

Divergence occurs when price and a momentum indicator move in opposite directions, signaling that the force behind a trend may be weakening even though price is still extending. In bearish divergence, price makes a higher high while an oscillator such as RSI or MACD makes a lower high, suggesting the rally is running on fading momentum. In bullish divergence, price makes a lower low while the indicator makes a higher low, suggesting selling pressure is exhausting.

For example, suppose Bitcoin pushes from $68,000 to a new high of $71,000, but the daily RSI peaks at 65 versus 78 at the previous high. Price is higher, momentum is lower — a bearish divergence that would make trend-followers more cautious about chasing the new high.

There is also hidden divergence, where the indicator makes a new extreme but price does not, which traders read as a trend-continuation clue rather than a reversal warning. A common misconception is that divergence is a sell or buy signal by itself; divergences can persist through several more highs or lows before price actually turns, especially in strong crypto trends, so most traders use them as an alert to tighten risk or seek confirmation from structure and volume, not as an immediate trigger.