koolgal
12-08 05:27

๐ŸŒŸ๐ŸŒŸ๐ŸŒŸBearish divergence is a technical analysis pattern that signals a potential reversal of an uptrend. It occurs when a stock's price makes a higher high but a momentum indicator such as Relative Strength Index or RSI makes a lower high.  This mismatch indicates that buying pressure is weakening despite rising prices, suggesting a potential downtrend trend is coming.

Eg: $Advanced Micro Devices(AMD)$ in November.

While its stock price pushed to new all time highs, the underlying momentum, as measured by indicators, told a different story.  This pattern serves as warning sign of significant price correction that followed.

AMD hits a 52 week high end October.  However the price's higher high was contradicted by the RSI's lower high, forming the classic bearish divergence pattern.

Soon after the divergence became apparent AMD corrected sharply , ultimately dropping 27% from its peak.

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