Question on Divergence Set-ups

Hi Guys, I recently started looking at divergence as an additional confirmation tool for my trades. So i'm kind of relatively new. While I know about the standard bull/bear divergence and 'trying' to understand hidden/reverse divergence, I often came across this pattern.

GBPUSD/Weekly with RSI 14

1. RSI makes higher lows
2. Price Action doesn't make any higher lows. In fact it pretty much reaches the previous price level.

What's confusing is that this would ideally look as a double bottom? So a bullish PA, so to speak?

How do you trade such formations..
Are they valid? Or do we just ignore these formations?

...and can someone refer me to the right resource to read about these formations?

Thanks.

I think its just a 'double bottom'. RSI is going to post a higher low because the last 14 periods had a less-powerful down trend in the first 14 periods. You can visually see that RSI would be increasing with recent price action as its still a derivative of price. More powerful being its a double-bottom.

Thanks for the explanation. Looks like its not as simple as spotting a divergence and taking that trade.

I started out in worse understanding than you. I was looking for an explanation for what I know now as hidden divergence. I even called it "convergence" LOL!

I wrote this thread a while ago, and this one generous member of FF (FudoMyo) helped me tremendously in regards to divergence. Maybe it will help you too.

http://www.forexfactory.com/showthread.php?t=410972

I personally no longer trade with divergence because it gives little clue as to what is going in the market.

Thanks a lot for that thread Ishtana... Lol @ 'convergence' (Must've been a Eureka moment, even if it lasted for a few minutes)

I don't look at divergence alone but use it in tandem with a trading system's rules. Just that I came across divergence (which I usually ignore, but read in boredome) and found it to be a good way to validate/confirm the existing trade.

Thanks once again.