What Do You Need to Know About MACD Divergence?

MACD divergence occurs when price and the MACD indicator move in different directions. For example, if price makes a new higher high (covered in the Trend Structure unit), but the MACD line makes a lower high instead of a corresponding higher high, this is commonly discussed as bearish divergence. Conversely, if price makes a new lower low, but MACD makes a higher low, this is commonly discussed as bullish divergence.

Divergence is commonly discussed as suggesting that the momentum behind a price move may be weakening, even though price itself is still making new highs or lows — since the MACD, being derived from EMAs, may not be confirming the same strength reflected in the raw price movement.

This is conceptually similar to the price-volume divergence discussed in the earlier Volume Analysis unit — both involve comparing price behaviour to a secondary measure (volume or, here, MACD) to check whether they're telling a consistent story or diverging from each other.