Is it credible that the KDJ has a second golden cross at a low level but the volume is only mildly enlarged?

A second golden cross at a low level in the KDJ indicator may signal a potential bullish reversal, especially if confirmed by rising volume and aligning technical indicators like RSI or MACD.

Jun 28, 2025 at 11:28 pm

Understanding the KDJ Indicator

The KDJ indicator, also known as the stochastic oscillator, is a momentum tool widely used in technical analysis within the cryptocurrency market. It consists of three lines: the K-line, the D-line, and the J-line. These lines help traders identify overbought or oversold conditions, potential trend reversals, and entry/exit points.

In crypto trading, the KDJ indicator is especially useful due to the volatile nature of digital assets. When the K line crosses above the D line, it forms what's called a "golden cross," suggesting a bullish signal. A second golden cross at a low level often catches traders' attention because it may indicate a strong reversal after a prolonged downtrend.

However, the credibility of this signal depends on several factors, including volume behavior, price action, and broader market sentiment.

Important Note: The KDJ works best when combined with other indicators like RSI, MACD, or volume analysis.

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What Does a Second Golden Cross at a Low Level Mean?

A second golden cross at a low level typically occurs after the first crossover has already taken place and the price failed to rise significantly. This scenario can be interpreted in multiple ways:

• It could suggest that bears are losing control, and bulls are attempting another push.
• Alternatively, it might reflect weak buying pressure if the price remains stagnant despite the bullish signal.

In the context of cryptocurrencies like Bitcoin or Ethereum, such signals must be interpreted carefully due to high volatility and frequent false breakouts. A second golden cross forming near the 20-level (considered oversold) might imply that the asset is undervalued and could rebound soon.

However, without supporting evidence from other aspects of technical analysis, especially volume, the signal becomes less reliable.

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Why Volume Matters in Confirming Signals

Volume plays a crucial role in validating any technical signal. In traditional markets, a surge in volume during a golden cross indicates strong participation and conviction among traders. In contrast, mildly enlarged volume suggests hesitation or lack of enthusiasm.

When analyzing crypto charts:

• A sharp increase in volume alongside a golden cross usually confirms a genuine trend reversal.
• If volume only rises slightly, it may indicate that large players (whales) aren't participating actively.
• In some cases, whales may manipulate volume by creating artificial spikes, misleading retail traders.

Therefore, while a second golden cross may appear promising, mild volume growth diminishes its reliability. Traders should look for additional signs, such as candlestick patterns or moving average alignment, before taking a position.

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How to Analyze the Scenario Step-by-Step

To determine whether the situation described is credible, follow these steps:

• • Identify the KDJ Levels: Check if both the K and D lines are below 30, indicating oversold territory.
  • Confirm the Crossovers: Ensure that two separate golden crosses have occurred — one earlier, followed by a pullback, then the second one.
  • Analyze Volume Patterns: Compare the volume during both crossovers. If the second crossover sees only mild volume growth, treat the signal with caution.
  • Examine Price Behavior: Look at how the price reacted after the first crossover. Did it rally? Did it fail quickly? This gives clues about market strength.
  • Use Other Indicators: Overlay RSI or MACD to see if they confirm the bullish signal from KDJ.
  • Observe Support and Resistance: Is the price near a key support zone? If so, the golden cross may carry more weight.

By going through each step methodically, you can better assess whether the pattern is trustworthy or just noise.

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Possible Scenarios in Real Crypto Charts

Let’s consider a real-world example using Ethereum (ETH) on a daily chart:

• Suppose ETH falls sharply, hitting a multi-week low.
• The KDJ enters oversold territory and forms a golden cross. However, the price barely responds.
• After a few days of sideways movement, the KDJ forms a second golden cross.
• During this second crossover, volume increases slightly but not dramatically.

In this case, although the KDJ shows a bullish signal twice, the muted volume suggests that buyers aren’t stepping in aggressively. This could mean:

• The downtrend is still intact.
• Accumulation is happening slowly, possibly setting up for a delayed rally.
• Or, the pattern is a trap set by market makers to trigger stop-losses.

Traders should watch closely for a breakout above resistance or a breakdown below support to confirm the next move.

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FAQs

Q: Can the KDJ indicator alone be used for trading decisions in crypto?

A: While the KDJ provides valuable insights into momentum and possible reversals, relying solely on it is risky. Always combine it with volume, price action, and other indicators like MACD or RSI for confirmation.

Q: What does it mean if the KDJ makes a golden cross but the price continues to fall?

A: This is known as a divergence. It means the indicator is showing bullish signs, but the price hasn’t confirmed it yet. Such scenarios often precede either a continuation of the downtrend or a delayed reversal.

Q: How long should I wait to confirm the validity of a second golden cross?

A: There’s no fixed time frame. Some traders wait for the next candle to close above a key moving average, while others monitor volume and order flow. Patience and risk management are key.

Q: Are whale activities visible in volume during a mildly increased volume phase?

A: Not always. Whale transactions may be hidden in dark pools or executed across multiple exchanges. On-chain analytics tools can sometimes reveal accumulation or distribution trends, but they require deeper research beyond simple volume readings.