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Boost Your Returns With 'Fundamental / Technical Divergence'

In this article, I will discuss the concept of Fundamental / Technical Divergence. I will also provide some current examples that offer the opportunity to profit from this phenomenon.

Understanding the Concept

Fundamental / Technical Divergence is a simple concept to grasp. In fact, among professional investors, the common sense of it is so obvious that it doesn't even have name. However, it is woefully underutilized by retail investors.

Quite simply, Fundamental / Technical Divergences occur when a company's fundamentals are moving in the opposite direction of the stock price (which is often driven by technical analysis). In other words:

  1. If the company is performing well and has favorable long-term prospects, but its stock is falling. In these cases, the further the stock falls, the more attractive it becomes.
  2. If the company is performing poorly and has unfavorable long-term prospects, but its stock is rising. In these cases, the higher