Divergence between an oscillator such as MACD, CCI, RSI and price can be a leading indicator of an imminent trend change.
When an oscillator diverges from price – for example price is making higher highs, while the oscillator is starting to flatten – this suggests that buying momentum is slowing despite price continuing to rise – indicating a possible pause in the trend or trend reversal.
If price is making lower lows and the oscillator is making higher lows, this divergence is bullish.
If price is making higher highs and the oscillator is making lower highs, this divergence is bearish.
Hidden divergence is a leading indicator of trend continuation.
When price makes a higher low and the oscillator makes a lower low this is a bullish sign.
When price makes a lower high and the oscillator is making a higher high this is a bearish sign.