Relative Strength Divergence

Relative strength divergence is a technical phenomenon where the price of an asset makes a new high or low, but a momentum indicator, such as the Relative Strength Index, fails to confirm this new extreme. This disagreement between price action and momentum suggests that the underlying strength of the trend is weakening, even if the price continues to move in the same direction.

In the volatile environment of digital assets, this divergence is a classic warning sign of impending trend exhaustion. It indicates that fewer market participants are supporting the current price move compared to previous moves.

Traders use this signal to anticipate a potential trend reversal or a significant correction. It is a fundamental tool for managing risk and avoiding entry into positions that are likely to lose momentum.