A technical setup where the direction of an indicator fails to confirm that of price action or another indicator.
A divergence can be positive or negative. A positive or more commonly know as bullish divergence occurs for example when price lows are declining, but the RSI lows area picking up. This can be interpreted as an lack of momentum to continue the decline and therefore a bullish signal. A negative or more commonly known as bearish divergence occurs when a rally is making new highs, but an indicator like the RSI is make lower highs, again indicating a lack of momentum to continue. This would be a bearish signal.