RSI Divergence Explained: Comparing RSI to Price

RSI divergence occurs when price and the RSI indicator move in different directions. Bearish divergence occurs when price makes a new higher high, but RSI makes a lower high instead of a corresponding higher high. Bullish divergence occurs when price makes a new lower low, but RSI makes a higher low.

This follows the same underlying logic as the MACD divergence concept covered in the previous unit — comparing price behaviour to indicator behaviour to check whether momentum appears to be confirming or weakening relative to the price move itself.

Some technical analysis education discusses a specific nuance regarding RSI divergence and trend direction — the observation that bullish divergence is more commonly discussed as occurring during downtrends, and bearish divergence more commonly discussed as occurring during uptrends, since divergence in this view reflects a weakening of the prevailing trend's momentum, rather than necessarily predicting an outright reversal of that trend.