School Corner
Here is another example of both bullish and bearish divergences using Ebay during the 2007-08 period.
You can see in the first half of the chart how the price continued to make new highs yet the RSI began to wane between Sep & October — this is telling you that the rate of ascent in the share price was faltering and that there were, in fact, a number of days during that 14 day period when the stock price did not make new highs — an indicator that the trend was turning.
20 | www.financial-spread-betting.com | June 2012
Similarly, in March of 2008 you can see that as the stock made a marginal new low that the RSI was continuing its rise, hence a positive divergence.