Regular divergence makes sense to me:
- Oscillators like the RSI show price momentum.
- If price lows are decreasing, but RSI lows are increasing, the decreasing price trend might reverse as the momentum increases (bullish divergence)
- If price highs are increasing, but RSI highs are decreasing, the increasing price trend might reverse as the momentum decreases (bearish divergence)
Why does this logic not also apply to hidden divergences?
Using hidden bullish divergence as an example, if price lows are increasing, while RSI lows are decreasing, then this should indicate a possible reversal since the upward momentum appears to be decreasing. But it's not.
Instead, this indicates a continuation of the upward trend despite the indicated lower momentum.
Does anyone have an intuitive way to understand the reasoning behind this?
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