Is it credible that the weekly level bottom diverges but the daily line is still falling?

Weekly bottom divergence suggests weakening bearish momentum, but a falling daily chart may still persist due to short-term pressure or market sentiment.

Jun 27, 2025 at 02:07 am

Understanding Divergence in Cryptocurrency Trading

In the cryptocurrency market, divergence refers to a situation where the price of an asset moves in one direction while a technical indicator moves in the opposite direction. This phenomenon is often used by traders to anticipate potential reversals. When discussing weekly level bottom divergence, it implies that on the weekly chart, the price has formed a lower low while the indicator (such as RSI or MACD) forms a higher low — suggesting weakening bearish momentum.

However, the question arises: what happens when this positive divergence appears on the weekly chart but the daily chart still shows a falling trend? This scenario can be confusing for traders who rely heavily on multi-timeframe analysis.

Divergence alone is not a guaranteed signal, especially when conflicting signals appear across different timeframes.

How Weekly Bottom Divergence Works

On the weekly timeframe, a bottom divergence typically indicates that despite the price hitting new lows, the underlying momentum is not confirming these lows. This may suggest that selling pressure is waning and buyers might soon step in.

To identify this, traders usually look at oscillators like RSI or MACD. For instance, if the price hits a new weekly low but the RSI does not reach a corresponding new low, that's a classic sign of bullish divergence.

• RSI Divergence: Price makes lower lows, but RSI makes higher lows.
• MACD Divergence: Price declines, but the MACD line starts to rise or form higher lows.

This could imply that the downtrend may reverse, especially if supported by volume or other indicators. However, this doesn't mean the reversal will happen immediately or even on the daily chart.

Why the Daily Chart Might Still Be Falling

Even with a weekly-level bullish divergence, the daily chart can continue to fall due to several factors:

• Short-term bearish dominance: Despite long-term signs of strength, short-term traders may continue pushing the price down.
• Lack of immediate buying pressure: The divergence may indicate future strength, but until actual buying comes in, the price may keep declining.
• Market sentiment and external news: Events such as regulatory announcements, exchange issues, or macroeconomic changes can override technical signals.

It’s important to understand that divergence suggests a potential change in trend, not an immediate reversal. In volatile markets like cryptocurrencies, timing is critical, and divergence should be used alongside other tools such as support/resistance levels, moving averages, and volume analysis.

Practical Steps to Analyze This Scenario

If you observe a weekly bottom divergence while the daily chart continues to decline, follow these steps to assess the situation more accurately:

• Confirm the divergence on multiple indicators: Use both RSI and MACD to verify if they’re showing similar divergent behavior.
• Analyze key support zones on the daily chart: Even if the price is falling, check whether it’s approaching a major support area that could trigger a bounce.
• Monitor volume patterns: Rising volume during divergence periods may strengthen the case for a reversal.
• Check for confluence with Fibonacci retracement levels: If the divergence aligns with a key retracement level, it adds credibility to the potential reversal.
• Use candlestick patterns for confirmation: Bullish candlestick formations like hammer, engulfing, or morning star near key support levels can act as triggers.

These steps help filter out false signals and increase the probability of identifying a genuine reversal point.

Real Market Examples and Observations

Take Bitcoin as an example. Suppose it dropped from $30,000 to $25,000 over several weeks, forming a lower low on the weekly chart. Meanwhile, the weekly RSI made a higher low, indicating a possible bottom formation.

However, on the daily chart, the price continued to fall toward $24,000, with no clear reversal pattern visible. Traders observing this would need to ask: is the weekly divergence strong enough to justify a trade?

In real-world scenarios, many experienced traders wait for confirmation on the daily chart before acting. Some may place limit orders near strong support levels or use options strategies to hedge their exposure without fully committing capital.

Frequently Asked Questions

Q1: Can divergence on the weekly chart be ignored if the daily chart is bearish?

A: No, it shouldn’t be ignored, but it also shouldn’t be acted upon blindly. Treat it as a warning sign rather than a direct buy/sell signal. Combine it with daily chart confirmation before making decisions.

Q2: How reliable is RSI divergence compared to MACD divergence?

A: Both have strengths. RSI is better for identifying overbought/oversold conditions, while MACD excels at capturing momentum shifts. It's best to use them together for stronger confirmation.

Q3: What timeframes should I use to confirm weekly divergence?

A: Typically, the daily and 4-hour charts are used to find entry points after spotting divergence on the weekly chart. These provide a balance between trend context and actionable signals.

Q4: Does divergence always lead to a reversal?

A: No, divergence can occur during strong trends and may not result in a reversal. It only indicates weakening momentum. Always look for additional confirmation through price action or volume.