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Bullish Divergence on the RSI

Trading Term

Bullish divergence on the RSI (Relative Strength Index) is a technical analysis signal that occurs when the price of an asset makes a lower low, but the RSI makes a higher low. This divergence suggests that downward momentum is weakening, even though the price is still falling, and may indicate a potential reversal to the upside.

How It Works:

  • Price action: The asset records a new low, implying continued selling pressure.
  • RSI action: At the same time, the RSI fails to reach a new low and instead forms a higher low, showing that relative strength is improving.
  • This mismatch signals that bearish momentum is fading, and buyers might be starting to step in.

Bullish divergence is especially significant when it appears on oversold RSI levels (below 30), as it increases the likelihood of a trend reversal or bounce. Traders use it to identify entry points, set stop-loss levels, or confirm support zones. However, like all technical signals, it is not foolproof and is best used alongside other tools like volume analysis,

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