Unlock Your Market Wizardry: Conquer the 2026 Chartered Market Technician (CMT) Test!

A bullish divergence is identified when the price of an asset makes a lower low while an oscillator (such as the Relative Strength Index or Moving Average Convergence Divergence) forms a higher low. This situation indicates that, despite the price declining, the momentum behind that move is weakening, as reflected by the oscillator making a higher low.

The presence of a higher low in the oscillator suggests that the downward selling pressure is lessening, which can indicate a potential reversal to the upside. Traders often view this as a signal that buying interest may be gathering strength even though the price has made a new low. Recognizing this divergence can provide traders with insights into potential trend reversals, allowing them to position themselves accordingly.

Other options do not describe bullish divergence. For example, a higher low in price combined with a lower low in the oscillator would indicate that despite a more favorable price movement, the underlying momentum is weakening, suggesting a possible bearish outlook. Similarly, consistent lows in both price and oscillator do not reveal any divergence and indicate a continuation of the current trend. Lastly, a higher low in both price and oscillator suggests strengthening momentum, which is not consistent with the concept of divergence. Thus, the definition of bullish divergence is accurately captured by identifying a lower