Bullish divergences
A divergence appears when price and an oscillator (RSI, MACD, Stochastic, Williams %R) move in opposite directions. It's the most reliable reversal signal in technical analysis: it anticipates the momentum change before the trend visually reverses on price.
Definition
A bullish divergence is characterized by:
Oscillator: low N+1 > low N (higher low)
Concretely: the asset makes a new low in value, but the oscillator — which measures the speed of the drop — makes a less low low than the previous one. Translation: selling pressure is exhausting, the bearish move is losing steam.
Types of divergences
Classic divergence (regular)
The most widely used. Signals an upcoming reversal.
- Bullish: price makes a lower low, oscillator makes a higher low. Buy signal.
- Bearish: price makes a higher high, oscillator makes a lower high. Sell / take-profit signal.
Hidden divergence
Rarer but powerful in established trends. Signals continuation, not reversal.
- Hidden bullish: price makes a higher low, oscillator makes a lower low. Bullish trend pulls back, you buy the dip.
- Hidden bearish: price makes a lower high, oscillator makes a higher high. Bearish trend resumes after a technical rebound.
Confluence: the real power
An isolated divergence gives a mediocre signal (~50-55% success rate). The power comes from confluence: multiple oscillators diverging simultaneously in the same direction.
Cash Scanner methodology
For each ticker, Cash Scanner detects divergences on 4 oscillators in parallel:
- RSI (14)
- MACD (12, 26, 9)
- Stochastic (14, 3, 3)
- Williams %R (14)
The confluence badge of the score triggers in tiers:
- 2 aligned divergences: weak signal (minor score bonus).
- 3+ aligned divergences: strong signal (significant bonus, shows up in opportunities card).
- 4 aligned divergences: very strong signal (rare, ⭐ badge in dashboard).
How Cash Scanner exploits divergences
- Phoenix score: confluence at 3+ divergences is one of the main components of Phoenix mode (early reversal entry).
- Confluence alerts: creating a "confluence" alert on a ticker triggers a Telegram notification as soon as 3 divergences are detected simultaneously.
- Opportunities filter: the Phoenix preset favors tickers with at least 2 active divergences, filtering market noise.
Limits and common pitfalls
- Confirmation required: a divergence is not a timing. The reversal may happen in 1 day, 1 week, 1 month. Wait for a confirmation candle (close above the last local high) before entering.
- False signals in strong trends: a bearish divergence in a hyper-strong bull market can be ignored for weeks. Cross-reference with ADX: ADX > 30 = solid trend = less reliable divergence.
- Consistent timeframe: a divergence on 5-minute charts doesn't carry the same weight as a daily one. Cash Scanner works on daily (swing trading).
- Multi-divergences guarantee nothing: even 4/4 confluence fails sometimes. Always size the position to absorb a failure (stop-loss, reasonable position size).