Divergence means that when the stock price trend on the K-line chart is higher than the previous peak, the stock price has been rising, while the trend of the graph composed of red columns on the MACD indicator graph is lower than the previous peak, that is, When the high point of the stock price is higher than the previous high point and the high point of the MACD indicator is lower than the previous high point of the indicator, this is called top divergence.

Among the various tools of technical analysis, the top divergence phenomenon is one of the most important and most easily overlooked analysis methods.

It means that the rise in the stock price is externally strong but mediumly strong, implying that the stock price will soon reverse and fall, which is a relatively strong sell signal.

Bottom divergence generally occurs in the low price area. When the price trend on the K-line chart is still falling, and the trend of the graph composed of green columns on the MACD indicator graph is smaller than the bottom, that is, when the low point of the price is lower than the previous low point, and the indicator The low point is higher than the previous low point. This is called bottom divergence. The phenomenon of bottom divergence is generally a signal that the price may reverse upward at a low level, indicating that it may rebound upward in the short term, and is a short-term buying signal.

Extended information:

Notes

1. The effectiveness of various technical indicators is not the same. When analyzing technical indicators, relatively speaking, use RSI The success rate of turning based on the deviation from KDJ to judge the market is higher.

2. Indicator divergence is generally more reliable when it appears in a strong situation. That is, when the price is at a high level, it usually only takes one divergence pattern to confirm the reversal pattern. When the price is at a low level, it usually needs to be repeated repeatedly. It takes several divergences to confirm a reversal pattern.

3. Divergence after passivation is more accurate. If the operation is completely based on the characteristics of the divergence, it will often cause big mistakes. This situation is especially likely to occur when the price plummets or rises. The stock price may still rise or fall after the KDJ indicator is passivated at a high or low level. In fact, once a divergence occurs at this time, the characteristics are very effective. Especially when the KDJ indicator is combined with the RSI indicator to determine the stock price trend, KDJ is used to determine the bottom. During the process with the top, it has a strong pointing effect.

Reference materials:

Baidu Encyclopedia-Top Divergence

Baidu Encyclopedia-Bottom Divergence