How to identify the trend continuation signal of the 4-hour MACD red column enlargement + 1-hour moving average bull?

A growing red MACD histogram on the 4-hour chart signals increasing bearish momentum, but within a bullish trend, it may indicate only a pullback—not a reversal.

Jul 28, 2025 at 04:01 pm

Understanding the MACD Indicator and Its Role in Trend Analysis

The MACD (Moving Average Convergence Divergence) is a momentum oscillator widely used in technical analysis to identify trend direction, momentum, and potential reversals. It consists of three components: the MACD line, the signal line, and the histogram. The MACD histogram, represented as red or green columns, reflects the difference between the MACD line and the signal line. When the histogram bars grow in height, it indicates increasing momentum in the current trend. A red column enlargement on the 4-hour chart suggests that bearish momentum is intensifying. However, when this occurs within an overall bullish trend, it may not signal a reversal but rather a temporary pullback or consolidation phase. Traders must analyze this signal in context with higher timeframes and other confirming indicators.

Interpreting the 4-Hour MACD Red Column Enlargement

When observing the 4-hour MACD red column enlargement, the immediate assumption might be bearish pressure. However, in a trend continuation scenario, this can represent a healthy correction within an ongoing uptrend. The key lies in identifying whether the enlargement occurs after a strong bullish move and whether price remains above significant support levels. To verify this, check the following:

• Confirm that the overall trend on the daily or 4-hour chart is upward, indicated by higher highs and higher lows.
• Ensure that the MACD line remains above the signal line or crosses back above it shortly after the red column peak.
• Observe whether the red columns begin to shrink after reaching maximum height, signaling a loss of bearish momentum.
• Look for volume patterns during the red column expansion—declining volume may suggest weak selling pressure.

This phase should not be mistaken for a reversal unless accompanied by bearish candlestick patterns or breakdowns below key moving averages.

Integrating the 1-Hour Moving Average Bullish Confirmation

After identifying a potential pullback on the 4-hour MACD, traders turn to lower timeframes for entry precision. The 1-hour chart provides a closer look at short-term price action. A bullish moving average configuration on this timeframe acts as a confirmation signal. Specifically, look for:

• Price trading above the 50-period and 200-period Exponential Moving Averages (EMA).
• The 50 EMA positioned above the 200 EMA, forming a "golden cross" or maintaining an upward slope.
• Recent candlesticks closing above both moving averages with strong bullish bodies.
• Absence of long upper wicks that indicate rejection at resistance.

When the 1-hour chart shows price respecting these moving averages as dynamic support and exhibiting bullish momentum, it aligns with the idea of trend continuation rather than reversal.

Combining the 4-Hour and 1-Hour Signals for Entry

To effectively trade the trend continuation signal formed by the 4-hour MACD red column enlargement and 1-hour moving average bullish structure, follow this multi-step verification process:

• Wait for the red MACD histogram on the 4-hour chart to reach its peak and begin contracting, indicating waning bearish momentum.
• Switch to the 1-hour chart and confirm that price has rebounded from a key support level, such as a previous swing low or a Fibonacci retracement level (e.g., 61.8%).
• Ensure that the 1-hour candles show strong bullish closes, ideally with increasing volume.
• Verify that the 50 EMA is sloping upward and that price is holding above it.
• Look for a bullish MACD crossover on the 1-hour chart, where the MACD line crosses above the signal line, reinforcing short-term momentum.

Once all these conditions align, the probability of a successful long entry increases significantly.

Setting Stop-Loss and Take-Profit Levels

Risk management is crucial when trading trend continuation patterns. After identifying the signal, define your position parameters clearly:

• Place the stop-loss below the most recent swing low on the 1-hour chart, ensuring it accounts for normal market volatility.
• Alternatively, set the stop-loss below the 200 EMA on the 1-hour chart, which acts as strong support.
• For take-profit, target the previous swing high on the 4-hour chart, or use a risk-reward ratio of at least 1:2.
• Consider scaling out—take partial profits at the first resistance level and let the remainder run toward the next major high.

Avoid placing stops too tightly, as this may result in premature exits due to normal price fluctuations.

Practical Example Using a Cryptocurrency Pair

Consider BTC/USDT on a 4-hour chart. Suppose Bitcoin has been in a steady uptrend, making higher highs. Suddenly, a series of red MACD histogram bars appear, growing in size, indicating increased bearish momentum. However, price does not break below the 200 EMA on the 4-hour chart. After three candles, the red bars begin to shrink. Switching to the 1-hour chart, you notice that price has bounced off the 50 EMA, with strong green candles forming. The 50 EMA is above the 200 EMA, both sloping upward. Volume increases on up-candles. This confluence confirms a trend continuation setup. Entering long at the close of the bullish 1-hour candle, with a stop below the recent low and target at the prior 4-hour high, aligns with the strategy.

Frequently Asked Questions

What if the 4-hour MACD red column keeps growing without shrinking?

If the red columns continue to expand over multiple periods, it suggests sustained bearish momentum. This may indicate a trend reversal rather than continuation. In such cases, avoid entering long positions until the histogram shows contraction and price stabilizes above key moving averages.

Can this strategy be applied to altcoins?

Yes, this method works on altcoins, especially major ones like ETH, BNB, or SOL, which exhibit sufficient liquidity and trend behavior. However, altcoins are more volatile, so ensure tighter risk controls and confirm signals across multiple timeframes.

How do I adjust the MACD settings for better accuracy?

The default MACD (12, 26, 9) is widely used, but some traders prefer smoothing with (24, 52, 9) on the 4-hour chart to reduce noise. Test variations in a demo environment before applying them live.

Is volume necessary to confirm this signal?

While not mandatory, volume confirmation strengthens the signal. Rising volume on 1-hour bullish candles supports the legitimacy of the move, whereas low volume may suggest a false breakout. Always cross-check with volume indicators when available.