How to arrange the monthly RSI oversold rebound + weekly three consecutive positive + daily line retracement gap?

The monthly RSI oversold rebound, three weekly green candles, and daily retracement gap together signal a high-probability bullish entry with defined risk.

Jul 28, 2025 at 07:43 am

Understanding the Components of the Strategy

To effectively apply the monthly RSI oversold rebound, weekly three consecutive positive candles, and daily line retracement gap strategy, it is essential to understand each component individually before combining them.

• The monthly RSI oversold rebound refers to a situation where the Relative Strength Index (RSI) on the monthly chart falls below 30, indicating that the asset has been heavily sold off over the long term. When the RSI begins to rise from this level, it signals a potential reversal in momentum. This is considered a foundational signal for long-term entry setups.

• The weekly three consecutive positive candles means that the closing price of the cryptocurrency has been higher than the opening price for three weeks in a row. This shows consistent upward pressure and confirms that short-term sentiment is turning bullish. It strengthens the signal from the monthly RSI by indicating that the reversal is gaining traction.

• The daily line retracement gap occurs when a price gap forms on the daily chart after a sharp upward move, followed by a pullback that partially fills the gap. Traders watch for the price to retest and hold above the gap area, which then acts as a support zone. This provides a precise entry point with a defined risk level.

Combining these three elements increases the probability of a successful trade by aligning long-term, medium-term, and short-term signals.

Setting Up the Chart Configuration

To monitor and execute this strategy, proper chart setup is critical.

• Open a trading platform that supports multi-timeframe analysis, such as TradingView or MetaTrader.
• Create three separate chart windows or use a multi-pane layout:
  • One for the monthly timeframe to track the RSI.
  • One for the weekly timeframe to identify the three green candles.
  • One for the daily timeframe to spot the retracement gap.
• Apply the RSI indicator (default 14-period) to the monthly chart. Adjust the overbought/oversold levels to 70 and 30 if not already set.
• Ensure candlestick charts are used across all timeframes for accurate pattern recognition.
• Enable volume indicators on the daily chart to confirm buying interest during the gap retest.
• Use horizontal lines to mark the boundaries of the daily gap for visual clarity.

This configuration allows simultaneous monitoring of all three conditions without switching timeframes repeatedly.

Identifying the Monthly RSI Oversold Rebound

The first trigger in this strategy is the monthly RSI entering oversold territory and showing signs of recovery.

• Monitor the monthly RSI and wait for it to drop below 30. This often happens after prolonged bear markets or major corrections.
• Confirm that the RSI is beginning to rise—this means the current monthly candle’s RSI value is higher than the previous month’s.
• Do not act solely on the RSI crossing above 30. Wait for confirmation from the weekly and daily timeframes.
• Assets like Bitcoin or Ethereum may exhibit this pattern after halving events or macroeconomic shifts.
• Historical examples include BTC in early 2019 and mid-2020, where monthly RSI dipped below 30 and began to climb, marking the start of bull runs.

This signal alone is not enough for entry but serves as a filter for potential long opportunities.

Confirming Weekly Three Consecutive Positive Candles

Once the monthly RSI shows recovery, the next step is to verify bullish momentum on the weekly chart.

• Switch to the weekly timeframe and look for three consecutive green (positive) candles.
• A green candle means the close is higher than the open. Ignore wicks; focus only on body color.
• These candles should appear after a downtrend or consolidation period to confirm a shift in sentiment.
• Volume on these candles should ideally increase, showing stronger buying conviction.
• If the third candle closes near its high, it indicates strong demand.
• Avoid setups where the candles are small or have long upper shadows, as they suggest hesitation.

This weekly pattern acts as a bridge between the long-term RSI signal and the short-term daily entry.

Locating the Daily Retracement Gap

After confirming the higher timeframe signals, pinpoint the entry using the daily chart.

• Identify a gap up on the daily chart—a candle that opens significantly above the previous candle’s close with no trading in between.
• After the gap, the price should rise sharply, then pull back.
• The pullback should retrace into the gap zone but not fully close it. The unfilled portion becomes support.
• Wait for the price to stabilize and form a bullish candle (e.g., hammer, bullish engulfing) at the gap support.
• Place a buy order slightly above the high of the stabilization candle to confirm momentum resumption.
• Set a stop-loss below the lowest point of the retracement, ensuring it’s under the gap support.
• Target levels can be set at previous resistance zones or using Fibonacci extensions.

This step provides a low-risk, high-reward entry with clear technical justification.

Executing the Trade with Risk Management

Once all conditions are met, execution must follow strict rules.

• Allocate no more than 1% to 2% of total portfolio value per trade to manage risk.
• Use limit orders to enter at the desired price near the gap support.
• Avoid market orders during volatile periods to prevent slippage.
• Set the stop-loss immediately after entry. For example, if the gap support is at $30,000, place the stop at $29,500.
• Consider using a trailing stop once the trade moves in your favor to lock in profits.
• Monitor for any divergence on the daily RSI as the price rises—bearish divergence may signal a pause.
• Do not add to the position unless a new setup forms independently.

This disciplined approach ensures consistency even if individual trades fail.

Frequently Asked Questions

What if the daily gap is fully closed?

If the price drops below the gap’s lower boundary, the setup is invalidated. The gap no longer acts as support, and the retracement may turn into a deeper correction. Avoid entering in such cases.

Can this strategy be applied to altcoins?

Yes, but only to high-liquidity altcoins with reliable price data and volume. Low-cap tokens often have manipulated gaps and erratic RSI behavior, making the signals unreliable.

How long should I wait for the weekly candles to form?

Each weekly candle closes at 00:00 UTC on Monday. You must wait for the full week to complete before confirming the third green candle. Do not assume the outcome before the close.

Is the 14-period RSI mandatory, or can I adjust it?

The 14-period RSI is standard and widely used. Changing the period alters sensitivity—shorter periods generate more signals but increase false positives. Stick to 14 unless backtesting proves another setting effective.