Crude Oil Trading Divergence Definition

Divergence trading concept is a concept where a trader will for a difference between the crude oil price movement with the movement of a technical indicator. For our example we shall use the RSI indicator to explain divergence trading.

RSI indicator is one of the commonly used divergence trading indicator. This technical indicator is an oscillator similar to the RSI & it can be used to trade divergence setups just the same way as the RSI indicator.

RSI Oil Technical Analysis & RSI Trading Signals

RSI Divergence Technical Indicator

RSI Bullish Oil Trading Divergence Setups

Classic RSI Bullish Oil Trading Divergence Setup

RSI classic bullish divergence occurs when crude oil price is making lower lows ( LL ), but the RSI technical trading indicator is making higher lows ( HL ).

Oil Trading Classic Bullish Divergence - RSI Oil Trading Divergence Definition

RSI classic bullish divergence warns of a possible change in the oil trend from down to up. This is because even though the crude oil price went lower the volume of sellers who pushed the crude oil price lower was less as illustrated and shown by the RSI indicator. This is an technical indicator of the underlying weakness of the downward trend.

Hidden RSI Bullish Crude Oil Trading Divergence Setup

Forms when crude oil price is making a higher low ( HL ), but the RSI technical trading indicator is showing a lower low ( LL ).

RSI hidden bullish divergence occurs when there is a retracement in an upwards oil trend.

Oil Hidden Bullish Divergence - RSI Oil Trading Divergence Definition

This set-up confirms that a retracement move is complete. This RSI divergence setup indicates underlying strength of an upward oil trend.

RSI Bearish Oil Trading Divergence

Hidden RSI Bearish Crude Oil Trading Divergence Setup

Forms when crude oil price is making a lower high ( LH ), but the oscillator technical indicator is showing a higher high ( HH ).

Hidden bearish divergence forms when there's a retracement in a downward oil trend.

Oil Hidden Bearish Divergence - RSI Oil Trading Divergence Definition

This set-up confirms that a retracement move is complete. This divergence indicates underlying strength of a downwards oil trend.

RSI Classic bearish Oil Trading Divergence Setup

RSI classic bearish divergence occurs when crude oil price is making a higher high ( HH ), but the RSI technical trading indicator is making lower high ( LH ).

Oil Classic Bearish Divergence - RSI Oil Trading Divergence Definition

RSI Classic bearish divergence warns of a possible change in oil trend from up to down. This is because even though the crude oil price went higher the volume of buyers who pushed the crude oil price higher was less as illustrated and shown by the RSI indicator. This is an technical indicator of the underlying weakness of the upwards trend.