Divergence
A condition in which price and an indicator derived from it move in opposite directions.
How it is identified
Test: price makes a new extreme while the indicator fails to confirm it with a corresponding new extreme
Unit
qualitative
In depth
Divergence is arithmetically inevitable at times, because most oscillators are bounded while price is not — a series making progressively smaller advances will show a falling oscillator even as price rises, with no interpretation required. That mechanical origin is why divergence appears far more often than reversals do, and why acting on every instance produces many false signals. It has no defined invalidation point of its own, so a divergence can persist and deepen for months while price continues in the same direction. The condition is described here; nothing about a reversal is claimed.
Worked example
Price rises from ₹520 to ₹536, a 3.1% advance, after an earlier leg of ₹470 to ₹520, a 10.6% advance. Any momentum oscillator must read lower at the second peak — that is arithmetic, not a signal.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Divergence” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.