How To Trade Stock Divergences
In order to trade stock divergences, you must first understand what they are and how to identify them. A divergence occurs when the price of a security diverges from its underlying indicator. There are two types of divergences: bullish and bearish. A bullish divergence occurs when the price of a security is making new lows while its indicator is making new highs. This is an indication that the price will likely reverse course and start moving higher. A bearish divergence occurs when the price of a security is making new highs while its indicator is making new lows. This is an indication that the price will likely reverse course and start moving lower.