How to follow up the monthly RSI bottom divergence + weekly MACD golden cross + daily line breaking through the neckline?

A monthly RSI bottom divergence, weekly MACD golden cross, and daily neckline breakout together signal a high-probability bullish trade with strong confluence across timeframes.

Jul 30, 2025 at 02:43 am

Understanding the RSI Bottom Divergence on the Monthly Chart

When analyzing RSI bottom divergence on the monthly chart, traders focus on identifying a scenario where the price makes a lower low, but the Relative Strength Index (RSI) forms a higher low. This indicates weakening downward momentum and potential reversal. To detect this, load the monthly timeframe on your trading platform and apply the RSI indicator, typically with a 14-period setting. Watch for instances where the asset’s price reaches a new low, yet the RSI fails to break below its previous low. This discrepancy suggests that selling pressure is decreasing, even as the price drops. Confirm the divergence by drawing trendlines on both the price and the RSI. The divergence is valid only if the price trendline breaks downward while the RSI trendline holds or rises. This signal, when occurring on the monthly chart, carries significant weight due to the long-term nature of the data.

Identifying the Weekly MACD Golden Cross

The MACD golden cross on the weekly chart occurs when the MACD line (the difference between 12-period and 26-period EMAs) crosses above the signal line (9-period EMA of the MACD line). To locate this, switch to the weekly timeframe and apply the standard MACD settings (12, 26, 9). Wait for the MACD histogram to shift from negative to positive territory, indicating bullish momentum. The actual cross must happen after a period of downtrend or consolidation. A golden cross preceded by a bearish trend increases the reliability of the signal. It is essential to confirm that the cross is not occurring in a sideways market without clear direction. Additionally, observe the volume during the cross—rising volume reinforces the validity of the signal. When the MACD line sustains above the signal line for at least one full week, it strengthens the bullish case.

Analyzing the Daily Chart Neckline Break

The neckline is a key resistance level in technical patterns such as the inverse head and shoulders or double bottom. On the daily chart, identify such a pattern by locating two or three troughs with a connecting resistance line—the neckline. When the price breaks above this neckline with strong volume, it confirms the pattern’s completion and signals a potential upward move. To validate the breakout, ensure that the close of the candle is above the neckline, not just an intraday spike. Use a horizontal line tool to draw the neckline across the swing highs. Wait for at least one retest of the neckline, which should now act as support. If the price holds above it during the retest, the breakout is considered confirmed. Apply volume indicators to ensure that the breakout candle has volume exceeding the 20-day average.

Synchronizing the Three Signals Across Timeframes

For a high-probability trade setup, all three conditions must align across different timeframes. Start by confirming the monthly RSI bottom divergence. Once that is in place, check the weekly chart for the MACD golden cross. Only after both long-term signals are active, shift focus to the daily chart for the neckline breakout. This multi-timeframe confluence increases the reliability of the entry. Use a trading platform that allows synchronized chart viewing, such as TradingView, to monitor all three timeframes simultaneously. Set alerts for when the MACD cross occurs or when price approaches the neckline. The ideal scenario is when the daily breakout happens shortly after the weekly golden cross, and both occur while the monthly divergence is still valid. Avoid entering if any of the signals are lagging by more than four weeks.

Executing the Trade with Risk Management

Once all three conditions are met, prepare to enter the trade. Use a limit order just above the daily neckline to ensure execution after confirmation. Set a stop-loss below the most recent swing low on the daily chart, or below the right shoulder in an inverse head and shoulders pattern. Position size should not exceed 5% of your portfolio per trade. For take-profit levels, measure the distance from the bottom of the pattern to the neckline and project it upward from the breakout point—this is the measured move target. Use trailing stops to capture extended momentum if the price continues upward. Monitor the RSI on the daily chart to avoid overbought conditions; if it exceeds 70, consider partial profit-taking. Keep an eye on on-chain data or funding rates for cryptocurrencies to confirm sentiment alignment.

Monitoring Post-Entry Price Action

After entry, continuously observe the price behavior on all three timeframes. On the daily chart, ensure that the price remains above the neckline and that volume remains supportive. On the weekly chart, confirm that the MACD lines stay above the signal line and that the histogram remains in positive territory. On the monthly chart, watch for the RSI to stabilize above 50, indicating sustained momentum. If the price pulls back but holds above the neckline, it reinforces the breakout. Use moving averages like the 20-day EMA on the daily chart as dynamic support. Any close below this level may signal weakening momentum and warrant reevaluation of the position.

Frequently Asked Questions

What if the neckline break occurs without volume confirmation?

A breakout without high volume is considered weak. It may be a false breakout or a trap set by market makers. Wait for a retest with volume before entering. If volume remains low during the retest, avoid the trade.

Can this strategy be applied to altcoins?

Yes, but only to high-liquidity altcoins with consistent trading volume. Low-cap coins often exhibit erratic price action and unreliable technical signals. Verify that the altcoin has a market cap above $100 million and daily volume exceeding $10 million.

How long should I wait for the weekly MACD cross after the monthly RSI divergence?

Ideally, the MACD golden cross should occur within one to three months after the RSI divergence. If the cross happens later, the divergence may have lost relevance due to market changes.

What tools can help automate monitoring of these signals?

Use TradingView alerts to set notifications for RSI divergences, MACD crossovers, and price breaking key levels. Scripts like Pine Script can be customized to scan for these multi-timeframe conditions across your watchlist.