Convergence and divergence: the pivotal rule

This is the most important rule in our method, and around it turns the naming of structures. When a three-wave move completes (motive, then correction, then motive), we look at the two momentum peaks on MACD 4C at the first and third waves, compare them with the two price peaks, and find one of two states: divergence or convergence.

Divergence

Divergence occurs when price makes a higher high in the third wave while momentum makes a lower high than in the first; the move extended in price but with a weaker drive. This is the fingerprint of the three-wave structure ABC: two motive waves A and C with a correction B between them, and a structure drawing its last breath. Hidden divergence does not concern us in wave analysis — only regular divergence between the peaks (or the troughs in a decline).