A bearish divergence is the pattern that occurs when the price reaches higher highs, while the technical indicator makes lower highs. Although there is a bullish attitude on the market, the discrepancy means that the momentum is slowing. Therefore it is likely that there will be a rapid decline in price. RSI divergence is primarily used to determine when it’s time to sell because prices are likely to drop or when a general trend reversal is in the cards. As a leading indicator of a trend reversal, divergence should be combined with other technical analysis methods when making the decision to act on a specific investment.
