thE hAnDbook of tEchnicAL AnALySiSFigure 9.54 Reverse Bearish Divergence Leading to Continuation of the Current and
Reversal of the Prior Larger Trend.
Figure 9.55 Reverse Bullish Divergence Leading to Continuation of the Current and
Reversal of the Prior Larger Trend.
9.3.6 rationale underlying Contemporary reverse
Divergence: the Momentum principle, Over‐reaction,
Overbought/Oversold, Chronology, and Contrarianism
There is no real definitional conflict between the rationale underlying standard
divergence and Bull/Bear Setups. This is because in both types of divergences,
price is expected to follow through in the direction of the supporting data series as
indicated at the point of non‐confirmation. Therefore, with Bull and Bear setups,
any continuation of the current larger trend is regarded as merely temporary and
may be understood to represent some short‐lived expression of over‐reaction in