Situation where indicators suggest trend in a different direction than price action. Traders citing price divergence will usually position themselves for a reversal of price action.
Price divergence in technical indicators often forms as trend strength weakens, as momentum from a well formed move breaks down into increased volatility. Although price action may still appear to continue in one direction, technical indicators may diverge from price action. Since the technical indicators divergence is picking up on the lessening strength in trend, traders will watch for, and position themselves to take advantage of a reversal. Either exiting existing positions, or looking for entry opportunities.
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