Bullish Divergence

Bullish divergence is a specific pattern where an asset price records a lower low while an oscillator like the MACD records a higher low. This indicates that even though the price is dropping, the downward momentum is decreasing, which often precedes a trend reversal to the upside.

It suggests that sellers are exhausted and buyers are beginning to step in, even if the price has not yet reflected this change. Bullish divergence is one of the most powerful signals in technical analysis for identifying potential bottoms.

Traders look for this pattern to enter long positions with a favorable risk-to-reward ratio. In the context of cryptocurrencies, which are prone to sharp liquidations, identifying bullish divergence can help traders catch the start of a recovery.

It is a classic example of how momentum can lead price action in predicting market turns.