Understanding how the trend really works is a great asset for every trader. Unfortunately, trends do not last forever… Eventually it will make a pause or even stop and turn around (reverse).
It is important to realize when a reversal could occur because you want to avoid trading with the trend at its end.
Price movement is showing the path of least resistance. The path is decided by 2 main factors: energy and resistance. Or in other words, there is a continuous battle between momentum (energy) and support and resistance (S&R).
Sometimes momentum is stronger than S&R. In other cases momentum is weaker than S&R.
The trend typically stops at a point when momentum becomes weaker and in an area where support and resistance (S&R) shows strong confluence. This is when the retracement or reversal often starts and price develops a motion against the direction of the trend.
The next main question is: will price only make a light pullback, a deep retracement or actually reverse in its entirety?
Divergence is an important factor in answering this question. When multiple time frames are all showing divergence, then a reversal becomes more likely. The more time frames, the more likely that a reversal is about to start. For instance, divergence on the weekly, daily and 4 hour chart would seriously endanger the chance of trend continuation and increase the chance of a trend reversal.