Hidden bullish divergence serves as a technical signal indicating the potential for the continuation of an uptrend, particularly in the context of Bitcoin's recent price behavior.
What is Hidden Bullish Divergence?
Hidden bullish divergence occurs when an asset's price forms higher lows while momentum indicators like RSI or MACD show lower lows. This mismatch indicates hidden strength in the market, even as indicators appear to weaken. Unlike regular bullish divergence, which predicts reversals, hidden divergence supports the notion that the current trend will continue upwards.
Why is this signal important now?
Recently, Bitcoin's short-term timeframes have demonstrated signs of hidden bullish divergence. Price action has created a series of higher lows, suggesting that buyers are actively entering the market again. Meanwhile, RSI or MACD has shown lower lows, producing a classic hidden bullish signal. This indicates that momentum is rebuilding, despite recent fluctuations.
How Traders Respond to the Signal?
To trade this setup, traders first identify the divergence between price and the indicator. Then, they wait for confirmation, such as the RSI rising above the midpoint (50) or a bullish MACD crossover. Once confirmed, a common strategy is to enter long positions with stop-losses set below recent swing lows. Profit targets are typically set at previous resistance levels or based on recent price ranges.
Hidden bullish divergence provides traders with an opportunity to optimize their strategies in a rising Bitcoin market. While this strategy does not guarantee success, it offers low-risk entry points within the existing uptrend.
