Apr. 25 at 5:46 PM
No one indicator tells the whole story, but here is an example of RSI divergence signalling a reversal. So divergence is simply the price of a stock going one way and an indicator going the other way.
#1 & #2- the price of
$SRTA is showing lower highs while
#3 & #4- the RSI is showing higher lows.
combined is showing the opportunity of a reversal. Now, then the 5-day EMA (green line) crosses above the 10-day SMA (yellow line), that's a confirmation momentum has changed positive. Then there is a bullish engulfing candle that says that is true, and the reversal is on.
Now we have an uptrend showing higher highs on the stock and higher lows on the RSI. Usually indicates the trend will continue.
Point is, when I see #1,2,3,4 together, I start to look for confirmation of a reversal, which happened.
