A regular divergence is used as a possible sign of a trend reversal. There are two types of regular divergences: bullish and bearish.
Regular Bullish Divergence
A regular divergence is used as a possible sign of a trend reversal. There are two types of regular divergences: bullish and bearish. Regular Bullish Divergence If the price is making lower lows (LL), but the oscillator is making higher lows (HL), this is considered regular bullish divergence. This usually occurs at the end of a DOWNTREND. After establishing a second bottom, the price will likely rise if the oscillator fails to make a new low, as price and momentum are typically expected to move in line with each other.
Regular Bearish Divergence
If the price is making a higher high (HH), but the oscillator is a lower high (LH), then you have regular bearish divergence. This type of divergence can be found in an UPTREND. After the price makes that second high, if the oscillator makes a lower high, then you can probably expect the price to reverse and drop.
As you can see from the images above, the regular divergence is best used when picking tops and bottoms. You are looking for an area where the price will stop and reverse. The oscillators signal to us that momentum is starting to shift, and even though the price has made a higher high (or lower low), chances are that it won’t be sustained. Now that you’ve got a hold on regular divergence, it’s time to move and learn about the second type of divergence….hidden divergence.
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