Structural Leading Divergence (SLD): A Novel Approach for RSI Divergence Detection with Zero Repainting Behaviour

Abstract

This research examined the reliability, timeliness, and causal validity of Relative Strength Index (RSI) divergence as a market-reversal signal in the Indian equity market, focusing on the NIFTY 50 index from 2000–2025. Despite the widespread use of RSI divergence, the study found significant drawbacks in current indicators, such as repainting behavior, delayed signal visibility, and limited real-time usability. The study assessed TradingView built-in RSI divergence indicator and a proprietary script, True Leading Indicator (TLI) (Bansal, 2025) to identify momentum shifts, and a new framework created in this study, called Structural Leading Divergence (SLD), using a manually selected analyst benchmark. The findings demonstrated that while TLI was timely, its coverage was restricted, whereas Trading View's indicator was primarily retrospective. SLD addressed these limitations through causal, non-repainting detection but did not achieve complete benchmark coverage, reflecting an inherent trade-off between early detection and noise suppression. These findings highlight both the practical constraints of divergence detection and its potential when structurally enforced. Future research opportunities may extend SLD across markets, timeframes and portfolio-level assessments.