RSI Divergence

Divergence means price is making a new extreme but momentum is not following. It is an early warning, not a trigger.

Find them

python3 ../technical-analysis/scripts/ta.py divergence --symbol ICICIBANK     # or --csv / --candles
python3 ../technical-analysis/scripts/ta.py summary --csv data.csv            # includes the 3 most recent

The script uses Wilder RSI(14) and compares consecutive swing lows (bullish) or swing highs (bearish) at least 5 bars apart within the last 90 bars. Each finding includes the dates, prices, RSI values, strength, and a warning when RSI sits in the weak 40–60 zone.

Types

Type	Price	RSI	Meaning
Regular bullish	Lower low	Higher low	Selling pressure fading; possible bottom
Regular bearish	Higher high	Lower high	Buying pressure fading; possible top
Hidden bullish	Higher low	Lower low	Uptrend pullback; continuation likely
Hidden bearish	Lower high	Higher high	Downtrend rally; continuation likely

Strength grading: a 2-swing divergence is standard; 3 swings is strong; from oversold (<30) or overbought (>70) territory is stronger; combined with falling volume or falling delivery % into the extreme is strongest. Weekly beats daily, and daily beats intraday.

Trade it (only with confirmation)

1. Identify the divergence on the daily chart and check the weekly bias (multi-timeframe-analysis). Regular divergences against a strong weekly trend fail often. Hidden divergences with the weekly trend are the higher-probability use.
2. Wait for confirmation:
   • a close beyond the minor trendline or the last lower-high (bullish case);
   • RSI crossing back above 30 (bullish) or below 70 (bearish);
   • a reversal candle (bullish engulfing, hammer) at a support level or Fib zone.
3. Enter on the confirmation candle's close, or on the next day's open if it was a results or event day.
4. Stop: beyond the divergence extreme plus a buffer (0.5% large cap, 1% mid/small cap), and at least 1 ATR away.
5. Targets: previous swing high/low, then Fib extensions 127.2% and 161.8% (ta.py fib).
6. Size with position-sizing and check R:R after costs (risk-reward-ratio).

Caveats

• Divergence can persist. Strong trends print several divergences before turning.
• RSI in 40–60 makes signals weak, and the script flags it.
• Event distortion: results days, ex-dividend drops, and bonus/split adjustments create artificial swings. Exclude those bars or treat findings around them with caution.
• Index vs constituents: a divergence on NIFTY is more reliable when heavyweights (HDFCBANK, RELIANCE, ICICIBANK, INFY, TCS…) show the same pattern.

Output

Divergence: [type] on [timeframe], [date1] → [date2]
Price ₹a → ₹b; RSI x → y ([strength]; RSI zone note)
Context: weekly bias …, level …, volume/delivery …
Plan: confirm on … | entry … | stop … | targets … | R:R after costs …