Negative Divergence
Negative divergence is a technical analysis term used to describe a situation in which the price of a security or index is moving in one direction, while a related indicator is moving in the opposite direction. This divergence can be used to identify potential reversals in the price of the security or index. Negative divergence is the opposite of positive divergence, which occurs when the price and indicator are both moving in the same direction.
History of Negative Divergence
Negative divergence was first identified by Charles Dow, the founder of Dow Theory. Dow Theory is a form of technical analysis that is based on the idea that the market discounts all available information. According to Dow Theory, when the price of a security or index is moving in one direction, while a related indicator is moving in the opposite direction, it is a sign that the market is discounting new information that is not yet reflected in the price. This divergence can be used to identify potential reversals in the price of the security or index.
Comparison Table
| Indicator | Price |
|---|---|
| Moving Average | Upward |
| Relative Strength Index | Downward |
Summary
Negative divergence is a technical analysis term used to describe a situation in which the price of a security or index is moving in one direction, while a related indicator is moving in the opposite direction. This divergence can be used to identify potential reversals in the price of the security or index. For more information about negative divergence, visit Investopedia, The Balance, and Investing.com.
See Also
- Positive Divergence
- Moving Average
- Relative Strength Index
- Dow Theory
- Technical Analysis
- Price Action
- Support and Resistance
- Trend Lines
- Chart Patterns
- Indicators
