How to interpret that the time-sharing chart shows "volume and price rise together" but the MACD red column shortens?

A rising price and volume with a shortening MACD red column suggests weakening bullish momentum despite apparent strength, signaling potential trend exhaustion.

Jun 24, 2025 at 01:08 am

Understanding the Concept of "Volume and Price Rise Together"

In cryptocurrency trading, when a time-sharing chart shows that both volume and price rise together, it is typically interpreted as a sign of strong buying pressure. This means more traders are entering long positions, pushing the price higher while increasing the trading volume.

This phenomenon often suggests bullish momentum in the market. For instance, if Bitcoin's price rises from $30,000 to $31,000 within an hour and the volume also increases during this period, it indicates growing confidence among traders. However, this alone may not guarantee continued upward movement, especially if other technical indicators contradict this behavior.

The Role of MACD in Technical Analysis

The Moving Average Convergence Divergence (MACD) indicator is one of the most widely used tools in crypto trading for identifying trend strength and potential reversals. It consists of three components: the MACD line, the signal line, and the MACD histogram (also known as the red and green columns).

When the MACD histogram displays red columns that are shortening, it implies that the bearish momentum is decreasing. But if the price is still rising along with volume, this creates a divergence between the price action and the MACD momentum. This contradiction can confuse many traders.

Why Does the MACD Red Column Shorten While Volume and Price Rise?

A situation where the MACD red column shortens while price and volume rise together may indicate weakening bullish momentum despite apparent strength. Here’s why:

• The MACD red column represents negative momentum — it shrinks when the downward pressure decreases.
• Even though the price is rising, the shrinking red bars suggest that the rate at which the price is climbing is slowing down.
• This could mean that although buyers are still active, their intensity is diminishing compared to earlier stages.

For example, imagine Ethereum rising sharply over two hours with high volume, but during the third hour, the ascent slows even though the volume remains high. The MACD might start showing shorter red bars, signaling that the uptrend may be losing steam.

How to Interpret This Divergence in Crypto Trading?

This type of divergence requires careful interpretation because it combines two conflicting signals:

• A rising price and volume usually encourages traders to go long.
• A shortening MACD red column suggests that the bullish push may be weakening.

Traders should consider the following:

• Look at the broader context — is the asset in an uptrend or nearing a key resistance level?
• Check for support/resistance levels on higher timeframes like 1-hour or 4-hour charts.
• Use additional indicators such as RSI or Stochastic to confirm whether the asset is overbought.

It’s important not to rely solely on one indicator. Instead, combine multiple sources of data before making a decision.

Practical Steps to Analyze This Scenario

If you observe this pattern on your chart, follow these steps to assess the situation accurately:

• Zoom out to check the overall trend: Determine whether the current movement aligns with the larger trend or if it’s a countertrend rally.
• Compare volume with previous candles: Is the volume truly significant, or is it just slightly higher than average?
• Observe candlestick patterns: Are there any signs of rejection, such as long upper shadows or bearish engulfing patterns?
• Monitor the MACD crossover: If the MACD line crosses below the signal line after a bullish run, it may confirm a reversal.
• Set up alerts or stop-losses: Given the mixed signals, place protective stops to limit risk exposure.

These steps help filter out false signals and provide a clearer picture of whether to hold, buy, or sell.

Frequently Asked Questions

Q: What does it mean if volume and price rise together but the MACD line doesn’t confirm?

A: It suggests a possible loss of momentum. Even though the price is going up, the underlying strength of the trend may be waning.

Q: Can I still trade a rising price and volume if the MACD red bar shortens?

A: Yes, but with caution. You should look for other confirming signals and manage risk carefully.

Q: How often does this kind of divergence occur in crypto markets?

A: It's relatively common, especially during sharp rallies followed by consolidation or correction phases.

Q: Should I ignore the MACD if volume and price are rising strongly?

A: No, the MACD provides insight into momentum changes. Ignoring it could lead to missing early signs of a trend reversal.