Understanding RSI Divergences in Trading

RSI divergences are powerful signals that often hint at potential trend reversals. Here's what you need to spot:

**Bullish Divergence**: Price creates a Lower Low (downtrend continues), but your RSI indicator prints a Higher Low. This mismatch suggests weakening downward momentum—a potential setup for upside reversal.

**Bearish Divergence**: Price marks a Higher High (uptrend holds), yet RSI fails to confirm with a Higher High, instead making a Lower High. This disconnect signals fading upward energy and warns of a possible pullback.

These divergences work because they reveal when price movement and momentum are out of sync. When they diverge, the market often corrects to realign them. Watch for these patterns on your charts—they're classic early warning signals before bigger moves.