Example of RSI Divergence :-

Updated 29 November, 2024 / Time: 17:45

1. Price Action (Candlesticks):
   • The chart shows a strong bullish reversal after a period of decline.
   • The highlighted green box represents a successful upward price movement, suggesting a breakout from the consolidation phase.
2. Bullish Divergence (RSI):
   • The lower section (RSI indicator) reveals a classic bullish divergence.
   • While the price made lower lows, the RSI formed higher lows (green dotted lines), signaling weakening bearish momentum and a potential trend reversal.
3. Trade Setup:
   • The entry point aligns with the bullish divergence confirmation.
   • The stop-loss is set below the recent swing low (red box), and the take-profit zone is marked at a higher level (green box), indicating a favorable risk-to-reward ratio.
4. Outcome:
   • The breakout has led to a strong rally, validating the bullish setup.

This chart highlights a textbook example of using RSI divergence to anticipate a trend reversal and identify profitable trading opportunities.