Posted by suresh uprety on Monday, June 11, 2012
A hidden divergence is used as a possible sign for a trend continuation.
If price is making a higher low (HL), but the oscillator is making a lower low (LL), this is considered hidden bullish divergence.
Your chart shows a price with a higher low, and the indicator with a lower low. The above item from the School says that should be a continuation.
Now you have a dilemma: The divergence calls for a continuation of the trend, which was bearish on your chart. However they call it a "bullish divergence," which here might indicate a trend change (hence you went long).
Since you have contradictory information, it's probably best to stay out of the trade.