Why context matters for divergences

Contrary to popular belief, bearish and bullish divergences do NOT always mean trend reversal. Sometimes they mean trend retracement. For example, back when we had the bearish trend with a bullish divergence, we needed confirmation with a higher low to confirm that the bearish trend was over. Once this happened, we entered a bullish trend of higher highs and and higher lows.

Now we are seeing a bearish divergence. This can be seen as a short opportunity to support at around 38k, but until a lower low and a lower high is formed, it can't be seen as a trend reversal.

Context matters.