Bullish Divergence explained with live case study from Keppel DC Reit

Imagine a car is moving at 240 km/h and needs to make a U-turn 200 m ahead. How do you know if the car can successfully make the U-turn? It might be able to do so if the car can slow down.

The reversal in stock price movement works the same as the above analogy. Price momentum will have to slow down first. The slowing down is a clue to a possible successful turning process.

Bullish Divergence: In technical analysis, bullish divergence occurs when the price of an asset forms a new low, but an oscillator or technical indicator fails to confirm the new low and instead forms a higher low. This suggests that the downtrend may be losing momentum and could potentially reverse, indicating a possible buying opportunity.

Sign of Potential Reversal: Bullish divergence is a signal of a potential trend reversal, indicating that the bears are losing strength and the bulls may take control of the market. It is important to look for confirmation from price action before relying solely on bullish divergence to make trading decisions.

Live Example: Today, I am going to explain bullish divergence using a live example on $Keppel DC Reit (AJBU.SG)$ to illustrate how this concept works in stock trading.

Price Action: KDC makes a lower-low

Indicator: MACD-histogram makes a higher low

Price confirmation: To confirm this is a valid reversal, the price will need to trade above 1.75 on a close