How to deal with the monthly moving average bullish arrangement + weekly RSI overbought + daily cross star?

A monthly MA bullish stack, weekly RSI overbought, and daily cross star suggest long-term strength with short-term caution—trim profits, tighten stops, but stay bullish.

Jul 27, 2025 at 07:43 am

Understanding the Monthly Moving Average Bullish Arrangement

When traders refer to a monthly moving average bullish arrangement, they are typically observing a specific alignment of moving averages on the monthly chart that signals long-term upward momentum. This arrangement usually involves the 5-month, 10-month, and 20-month moving averages forming a stacked order, where the shortest MA is above the medium, and the medium is above the longest. This configuration is considered a strong foundational signal for a sustained bullish trend in cryptocurrencies such as Bitcoin or Ethereum.

To identify this setup, open your preferred charting platform—such as TradingView—and load the monthly timeframe. Apply the three moving averages: SMA(5), SMA(10), and SMA(20). Confirm that the SMA(5) > SMA(10) > SMA(20), and all are sloping upward. This alignment suggests that large institutional or long-term holders are in control, reducing the likelihood of a sharp reversal in the near term.

It’s critical to understand that this signal works best when combined with other indicators. A standalone monthly MA bullish arrangement may lag, as monthly candles only update once every 30 days. Hence, while it confirms long-term sentiment, it should not be used in isolation to make trading decisions.

Interpreting Weekly RSI Overbought Conditions

The Relative Strength Index (RSI) on the weekly chart reaching overbought territory (typically above 70) indicates that the asset has experienced strong upward momentum over the past week. In crypto markets, which are highly volatile, RSI can remain overbought for extended periods during strong bull runs. Therefore, an overbought RSI does not necessarily signal an imminent reversal.

To analyze this properly, navigate to the weekly chart and apply the RSI(14) indicator. If the value exceeds 70, the market is technically overbought. However, in a strong uptrend confirmed by the monthly MA arrangement, this overbought condition may reflect accumulation rather than exhaustion. Watch for divergences—if price makes a new high but RSI fails to surpass its previous peak, that could indicate weakening momentum.

Some traders use RSI thresholds of 80 in crypto to define extreme overbought conditions, given the asset class’s tendency for parabolic moves. If RSI crosses above 80 on the weekly chart, caution increases, especially if volume begins to decline. Still, in the context of a monthly bullish MA setup, such overbought readings may simply reflect FOMO-driven buying.

Recognizing the Daily Cross Star Pattern

A daily cross star is a candlestick pattern characterized by a small real body with long upper and lower shadows, resembling a cross or plus sign. This pattern suggests indecision between buyers and sellers at a key price level. In the context of a bullish monthly trend and overbought weekly RSI, the cross star may indicate a potential pause or short-term pullback.

To spot this pattern, examine the daily candle. The open, close, high, and low should be such that the body is near the middle, and the wicks are significantly longer than the body. This reflects volatility but lack of directional commitment. If the cross star appears after a sharp upward move, it may mark a temporary top.

This pattern gains more significance if it forms near a known resistance level, such as a psychological price (e.g., $60,000 for Bitcoin) or a Fibonacci extension. Volume analysis is essential—declining volume during the cross star suggests reduced conviction, while high volume may indicate a shakeout of weak hands.

Strategic Response to the Combined Signal

When the monthly moving average bullish arrangement, weekly RSI overbought, and daily cross star appear together, the market is at a critical juncture. The long-term trend remains bullish, but short-term exhaustion is possible. Traders must adjust position management rather than reverse direction.

• Monitor price action following the cross star. If the next daily candle closes above the high of the cross star, bullish momentum may resume.
• Consider tightening stop-loss orders for existing long positions, placing them below the low of the cross star candle.
• Avoid initiating new longs immediately. Wait for confirmation, such as a bullish engulfing pattern or a retest of support with volume.
• Use the overbought weekly RSI as a signal to take partial profits on long positions, especially if holding from lower levels.

This confluence does not call for exiting the market entirely but for risk mitigation. The monthly trend remains intact, so aggressive shorting is not advisable. Instead, traders might explore options strategies, such as selling call options against existing holdings, to generate income during consolidation.

Practical Steps for Execution on Trading Platforms

To act on this multi-timeframe signal, follow these steps using TradingView and a connected exchange like Binance or Bybit:

• Open three chart windows: monthly, weekly, and daily for the cryptocurrency in question.
• On the monthly chart, add SMA(5), SMA(10), SMA(20) and verify the bullish stack.
• On the weekly chart, apply RSI(14) and confirm it is above 70 (or 80 for stricter criteria).
• On the daily chart, locate the most recent candle and assess whether it forms a cross star.
• Set up price alerts for breaks above the cross star’s high or below its low using TradingView’s alert function.
• If using API-connected trading bots, program conditional orders: buy stop above the cross star high, sell stop below its low.
• Adjust position size: reduce new entry size by 30–50% due to overbought conditions.

Ensure all indicators are applied correctly and that the time zones align (UTC is standard in crypto). Misaligned timeframes can lead to false signals.

Frequently Asked Questions

Can the monthly MA bullish arrangement persist even if the weekly RSI is overbought?

Yes. The monthly moving average bullish arrangement reflects long-term structural strength, which can coexist with short-term overbought conditions on lower timeframes. Crypto markets often exhibit extended overbought phases during bull runs, so RSI on the weekly chart may stay above 70 for several weeks without reversing.

What does a daily cross star imply if it appears at a new all-time high?

A cross star at a new high suggests market hesitation at uncharted price levels. Buyers may be pausing, and sellers are testing resistance. This does not confirm a reversal but warns of potential consolidation. Watch for follow-through candles to determine whether momentum resumes or distribution begins.

Should I close my long position if all three signals align?

Not necessarily. The alignment suggests caution, not exit. Consider taking partial profits and holding the remainder with a trailing stop. The monthly trend remains supportive, so maintaining exposure aligns with the dominant trend while managing risk.

How do I distinguish a cross star from a doji?

A cross star is a type of doji but specifically has long upper and lower shadows, indicating wide price swings within the period. A standard doji may have small shadows. The cross star’s elongated wicks highlight greater volatility and indecision, making it more significant in overbought or oversold contexts.