The buying point of the weekly MACD red column enlargement combined with the daily line breaking through the previous high

A growing weekly MACD red column followed by a daily close above the prior high signals potential bullish reversal, especially near support, offering a high-probability entry with confluence of momentum and structure.

Jul 26, 2025 at 01:22 am

Understanding the Weekly MACD Red Column Enlargement

The MACD (Moving Average Convergence Divergence) is a widely used momentum indicator in cryptocurrency trading. When analyzing the weekly chart, the red column in the MACD histogram represents a bearish momentum, indicating that the short-term exponential moving average (EMA) is below the long-term EMA. However, an enlargement of the red column does not necessarily signal a worsening downtrend. In certain contexts, it may suggest that bearish momentum is accelerating, but if this occurs near a significant support level or after an extended correction, it can reflect exhaustion of selling pressure.

Traders often misinterpret the growing red bars as a reason to short further. However, in confluence with other indicators, such as price action on the daily chart, this could instead mark a potential reversal zone. The key lies in identifying whether the enlargement is occurring after a prolonged decline and whether divergence is forming. A bearish divergence — where price makes a lower low but MACD makes a higher low — can accompany red column enlargement and hint at weakening downside momentum.

It is essential to monitor the MACD signal line crossover on the weekly chart. If the MACD line (blue) remains below the signal line (orange) while the red bars grow, the downtrend is technically intact. Yet, a slowing rate of red bar growth or a subsequent contraction may precede a bullish crossover, which becomes more meaningful when confirmed by daily structure.

Interpreting the Daily Line Breaking the Previous High

On the daily timeframe, a breakout above the previous swing high is a strong bullish signal. This structure indicates that buyers have overcome recent resistance, reflecting a shift in market sentiment. In crypto markets, where volatility is high and sentiment-driven moves are common, such breakouts often attract institutional and algorithmic participation.

For the breakout to be valid, several conditions must be met:

• The price must close above the prior high, not just spike through it intraday.
• The breakout should occur with increased volume or on-chain activity, confirming participation.
• There should be no immediate rejection; a close back below the level within one or two candles may indicate a false breakout.

When the daily candle closes above the previous high, it invalidates the prior bearish structure. This event suggests that supply has been absorbed and demand is now dominant. In technical terms, this is a higher high formation, which aligns with an emerging uptrend. Traders use this to re-evaluate stop-loss levels and consider initiating long positions.

The significance increases when the breakout occurs shortly after a weekly MACD red column enlargement. This combination suggests that the market has undergone a deep correction (reflected weekly), and the daily breakout confirms that bullish momentum has returned.

Combining Weekly and Daily Signals for Entry

The optimal buying point arises when both conditions align:

• The weekly MACD shows red column enlargement, ideally near a historical support zone or after a deep correction.
• The daily candle closes above the prior swing high, confirming bullish structure.

This confluence reduces the risk of entering during a weak bounce. Instead, it suggests a higher probability reversal supported by both momentum and price action.

To execute this strategy:

• Identify the most recent swing high on the daily chart.
• Monitor the weekly MACD histogram for red column growth following a downtrend.
• Wait for a daily close above the swing high with strong candlestick confirmation (e.g., a bullish engulfing or large green candle).
• Enter a long position at the close of the breakout candle or on the next open.
• Place a stop-loss just below the breakout level or the recent swing low to manage risk.

Position sizing should reflect the volatility of the asset. For example, in Bitcoin or Ethereum, a 1%–2% risk per trade is common. For altcoins, tighter stops and smaller allocations may be necessary due to higher volatility.

Practical Example Using Bitcoin (BTC/USDT)

Consider a scenario on the BTC/USDT weekly chart:

• After a 30% correction from a peak, the weekly MACD red columns begin to grow larger, indicating ongoing bearish momentum.
• However, the price approaches a key support level near $52,000, a zone that previously acted as strong support.
• On the daily chart, price consolidates for three weeks, forming a tight range.
• A daily candle closes at $54,500, breaking the prior high of $54,200 established before the drop.
• Volume on the breakout candle is 25% above average, and on-chain data shows increased exchange outflows.

In this case:

• The weekly MACD red column enlargement reflects the final phase of capitulation.
• The daily breakout confirms renewed buying interest.
• A long entry is justified at $54,500 or on the next open.
• A stop-loss is placed at $53,800, below the breakout level.
• Take-profit levels can be set at Fibonacci extensions (1.618 or 2.0) from the recent swing low to high.

This setup avoids chasing price too early during the downtrend and waits for structural confirmation.

Common Pitfalls and Risk Management

Even with a strong signal, traders must avoid overconfidence. Key risks include:

• False breakouts: Price may break the high but quickly reverse. Waiting for a retest of the breakout level as support increases confidence.
• Low volume breakouts: A breakout without volume confirmation is suspect. Use tools like TradingView’s volume profile or on-chain metrics (e.g., NVT ratio) to validate.
• Ignoring macro context: A favorable technical setup can fail during negative news cycles (e.g., regulatory crackdowns). Monitoring crypto news aggregators like CoinDesk or LunarCrush is essential.

Risk management steps:

• Never risk more than 2% of capital on a single trade.
• Use trailing stops to protect profits if the trend extends.
• Avoid averaging down in losing positions, especially in low-liquidity altcoins.

Frequently Asked Questions

What if the weekly MACD red column keeps growing after the daily breakout?

This can occur during early-stage reversals. As long as the daily structure remains bullish (higher highs and higher lows), the weekly MACD may lag. Focus on price action. A subsequent shrinkage of red bars or a bullish crossover will confirm momentum alignment.

How do I confirm the previous high on the daily chart accurately?

Zoom into the daily chart and identify the most recent swing high before the correction. Use horizontal lines to mark the exact price. Ensure it’s a clear peak with at least two lower candles on either side. Avoid minor wicks; focus on candle closes.

Can this strategy be applied to altcoins like SOL or ADA?

Yes, but with caution. Altcoins often exhibit exaggerated moves. Ensure the asset has sufficient liquidity and trading volume. Apply the same rules: weekly MACD behavior + daily breakout. Use tighter stop-losses due to higher volatility.

Should I use leverage when trading this setup?

Leverage amplifies both gains and losses. For this strategy, it’s advisable to trade spot or use minimal leverage (2x–3x). High leverage increases the risk of liquidation during normal pullbacks, even in valid setups.