A divergence is simply two items that don’t totally agree. An example would be if the Dow Jones Industrial Average goes to a new high, but the S&P 500 does not. The two indexes show a bearish divergence. Another example is if a stock, commodity or currency goes to a new high (or new low) and an indicator, like RSI, does not reach a new high. Again, that’s a bearish divergence.

A bullish divergence is just the opposite, one price reaching a new low, and the other price, or indicator not registering a new low.