What Is RSI Divergence?
RSI divergence occurs when the RSI indicator moves in the opposite direction of price. Bearish divergence: price makes a higher high but RSI makes a lower high — momentum is weakening despite the price advance. Bullish divergence: price makes a lower low but RSI makes a higher low — selling pressure is diminishing despite the price decline.
How RSI Divergence Works
Divergence is classified as regular (described above, signals reversal) or hidden (RSI makes new extreme while price doesn't, signals continuation). Hidden bullish divergence: price makes a higher low but RSI makes a lower low — the uptrend is still intact. Hidden bearish divergence: price makes a lower high but RSI makes a higher high — the downtrend continues.
Why It Matters for Traders
RSI divergence is one of the most reliable early warning signals in crypto. Bearish divergence on the daily chart at resistance has preceded many of Bitcoin's major tops. The signal is strongest when: the divergence occurs at a significant technical level, the RSI is in extreme territory (above 70 or below 30), and volume confirms the divergence.
