Divergence

It is a situation where the price movement of an asset diverges from the movement of an indicator, which can be interpreted as a potential shift in the trend and used to identify trading opportunities. There are two main types of divergence: bullish and bearish.

• Bullish divergence occurs when the price of an asset makes a lower low, but the technical indicator makes a higher low, indicating that momentum may be shifting upwards.
  

• Bearish divergence, on the other hand, occurs when the price of an asset makes a higher high, but the technical indicator makes a lower high, indicating that momentum may be shifting downwards.

Divergence is often used with other technical analysis tools, such as trend lines and support and resistance levels, to confirm potential changes in trend or momentum. However, it is important to note that divergence is not always a reliable indicator, and traders should use caution and employ risk management strategies when making trading decisions based on divergence signals.