Divergence

A comparison of two series over the same stretch of bars. Price registers a higher high or a lower low; an oscillator computed from the same closes registers a less extreme reading than it did at the previous turn. The two series therefore disagree about whether the move strengthened, and the disagreement is the object. The most common inputs are RSI, MACD and the stochastic oscillator, and the same bars can produce a divergence on one and not on another.

What produces it is arithmetic rather than intuition. An oscillator is a bounded transformation of recent movement, so it saturates: once it is near the top of its scale, a further advance that is slower or smaller than the previous one lowers the reading even as price rises. Divergence is therefore a statement about the rate of change of the move, and it is fully explained by the construction of the indicator being used.

Its standing is genuinely contested and worth reporting as contested. A divergence can persist across many bars while price continues in the original direction, which means the observation carries no timing at all and its adherents say so. It is also defined loosely: how far apart the two extremes must be, whether the comparison uses closes or wicks, and which indicator settings apply are all conventions rather than tests, and a definition that admits several answers is one a chart cannot contradict.