Every definition, rule and market claim the video puts on screen or states out loud, chased back to where it comes from.
Bearish divergence is price making a higher high while the momentum oscillator makes a lower high. Bullish divergence is price making a lower low while the oscillator makes a higher low. StockCharts ChartSchool states it in those terms: a bullish divergence occurs when “the underlying security makes a lower low, and RSI forms a higher low”, and a bearish divergence forms when “the security records a higher high and RSI forms a lower high”.
Source: StockCharts ChartSchool, Relative Strength Index (RSI). https://chartschool.stockcharts.com/table-of-contents/technical-indicators-and-overlays/technical-indicators/relative-strength-index-rsi
RSI is J. Welles Wilder’s, published in 1978 in New Concepts in Technical Trading Systems and in Commodities magazine that June, alongside ATR, Directional Movement and ADX. The default lookback is the 14 periods Wilder proposed, and the reading is bounded 0 to 100 by RSI = 100 − 100 / (1 + RS), where RS is average gain over average loss across the lookback.
Sources: J. Welles Wilder Jr., New Concepts in Technical Trading Systems, Trend Research, 1978. https://archive.org/details/newconceptsintec00wild StockCharts ChartSchool, Relative Strength Index (RSI), for the formula and the 14 period default: “The RSI calculation is based on 14 periods, the default Wilder suggested in his book.” https://chartschool.stockcharts.com/table-of-contents/technical-indicators-and-overlays/technical-indicators/relative-strength-index-rsi
Because the reading is an average of gains against an average of losses, a lower high in RSI beside a higher high in price says that the advance covered its ground with a smaller average gain per bar than the advance before it. That is a statement about the rate of the move. It is not a statement about its direction, which is the distinction the video is built on.
The video’s central claim, that divergence can build for a long time in a strong trend while price carries on, is the standard warning attached to the tool rather than a contrarian reading of it. ChartSchool: “divergences are misleading in a strong trend. A strong uptrend can show numerous bearish divergences before a top materializes. Conversely, bullish divergences can appear in a strong downtrend, yet the downtrend continues.”
Constance Brown’s range work is the same observation from the other side: RSI tends to fluctuate between 40 and 90 in a bull market, finding support at 40 to 50, and between 10 and 60 in a bear market, finding resistance at 50 to 60. An oscillator that spends a bull market in the upper half of its range will keep printing lower highs against higher highs without the trend being over. Andrew Cardwell’s positive and negative reversals, developed from the same material, put the weight on the price action rather than on the momentum reading.
Sources: StockCharts ChartSchool, Relative Strength Index (RSI). https://chartschool.stockcharts.com/table-of-contents/technical-indicators-and-overlays/technical-indicators/relative-strength-index-rsi Constance M. Brown, Technical Analysis for the Trading Professional, 2nd edition, McGraw-Hill, 2011, ISBN 9780071759144. https://www.amazon.com/Technical-Analysis-Trading-Professional-Second/dp/007175914X
MACD is Gerald Appel’s, from The Moving Average Convergence-Divergence Trading Method, 1979: the difference between two exponential moving averages of price, plotted as one line against a signal line. The stochastic oscillator is George Lane’s, from the late 1950s, and compares a closing price to the high and low range it printed in over a lookback.
Sources: Gerald Appel, The Moving Average Convergence-Divergence Trading Method, 1979. https://www.abebooks.com/Moving-Average-Convergence-Divergence-Trading-Method-Appel/31818266114/bd Stochastic oscillator, definition and attribution. https://en.wikipedia.org/wiki/Stochastic_oscillator
Each of these is a separate transform of the same price series over its own lookback, which is why a divergence visible in one is routinely absent in another over the same window. The video’s point about stacking six of them is a point about how many independent chances to find a pattern that creates, not a claim about any one of the tools being faulty.
The video describes price running above a shelf of equal highs, taking out resting stop orders, and then failing. That stop orders sit in predictable clusters, and that reaching those clusters produces unusually rapid moves, is documented rather than assumed. Carol Osler examined 9,655 stop-loss and take-profit orders totalling over 55 billion dollars, placed at a major foreign exchange dealing bank between 1 August 1999 and 11 April 2000 across dollar-yen, dollar-sterling and euro-dollar. Exchange rate trends were unusually rapid when rates reached the levels at which stop-loss orders are documented to cluster, and stop-loss orders “propagate trends and are sometimes triggered in waves, contributing to price cascades”. The response to stop-loss orders exceeded the response to take-profit orders and persisted longer.
Source: Carol L. Osler, “Stop-loss orders and price cascades in currency markets”, Journal of International Money and Finance, 2005, volume 24, issue 2, pages 219 to 241. https://ideas.repec.org/a/eee/jimfin/v24y2005i2p219-241.html Working paper text: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr150.pdf
This supports the mechanism the video draws: a run above equal highs is where resting orders are, taking them is what produces the burst, and the burst finishing is why the candle can close back below the level it just broke.