How to stop the loss of the monthly three consecutive negative + weekly KD dead cross + daily line falling below the 20-day line?

Three consecutive red monthly candles, a weekly KD dead cross, and a daily close below the 20-day MA signal strong bearish momentum—time to reduce risk and protect capital.

Jul 28, 2025 at 10:57 pm

Understanding the Monthly Three Consecutive Negative Candles

When analyzing cryptocurrency price charts, the appearance of three consecutive negative monthly candles is a strong bearish signal. This pattern indicates sustained selling pressure over a prolonged period, often reflecting deep market pessimism. Each negative candle represents a month where the closing price is lower than the opening price. When this occurs three times in a row, it suggests that long-term holders are exiting positions, and institutional or whale activity may be shifting toward accumulation at lower levels.

To identify this pattern, traders must switch their chart to the monthly timeframe and observe the color and structure of the last three candlesticks. A red or black candle (depending on chart settings) signifies a negative close. The key is not just the color but also the volume and wick behavior during these months. High volume on down months reinforces the strength of the downtrend. Recognizing this pattern early allows traders to reassess their risk exposure and consider protective measures.

Interpreting the Weekly KD Dead Cross

The KD indicator, also known as the Stochastic Oscillator, compares a cryptocurrency’s closing price to its price range over a specific period. When the %K line crosses below the %D line on the weekly chart, it forms a dead cross, signaling bearish momentum. This is especially concerning when it occurs in the overbought zone, but even more so when it happens in neutral or oversold areas, as it suggests momentum is turning downward despite no prior overextension.

To locate this signal:

• Navigate to the weekly chart of your chosen cryptocurrency.
• Apply the KD indicator (typically set at 9,3,3).
• Watch for the moment the %K line crosses below the %D line.
• Confirm the cross occurs alongside declining volume or widening spreads.

A weekly dead cross carries more weight than shorter timeframes due to its longer observation window. It often precedes extended downtrends, especially when aligned with other bearish patterns like the monthly three red candles. Traders should treat this as a warning to reduce exposure or implement hedging strategies.

Daily Price Action: Closing Below the 20-Day Moving Average

The 20-day moving average (MA) is a widely followed benchmark for short- to medium-term trend direction. When the daily closing price falls below this line, it signals weakening momentum and a potential shift from bullish to bearish sentiment. This is not a standalone signal but gains significance when combined with the monthly and weekly indicators already discussed.

To verify this condition:

• Open the daily chart of the asset.
• Overlay the 20-day simple moving average (SMA).
• Check whether the most recent candle closed below the 20-day SMA line.
• Examine the prior few days to see if price has been hovering near or rejecting the MA.

A decisive close below the 20-day MA, especially on high volume, indicates that recent buyers are now underwater, increasing the likelihood of further selling. This level often acts as dynamic resistance once broken, meaning rallies back to the MA may be met with renewed selling pressure.

Immediate Risk Mitigation Strategies

When all three conditions are present—three negative monthly candles, a weekly KD dead cross, and a daily close below the 20-day MA—the risk of continued downside is elevated. To stop loss in such a scenario, traders must act swiftly and systematically.

Consider the following protective actions:

• Close or reduce long positions immediately, especially if entry was based on bullish assumptions.
• Set hard stop-loss orders slightly below recent swing lows to limit downside.
• Avoid averaging down unless a clear reversal pattern forms with volume confirmation.
• Shift a portion of holdings into stablecoins or low-correlation assets to preserve capital.

For those using leverage, the danger is amplified. Margin calls can occur rapidly in such environments. Adjusting position size or exiting leveraged trades altogether is a prudent move. The goal is not to predict the bottom but to preserve equity for better opportunities.

Using Technical Confirmation to Reassess Entry

While the focus is on stopping loss, understanding when the danger may have passed is equally important. Reversal signals should be clear and multi-timeframe confirmed before considering re-entry.

Watch for these reversal indicators:

• Monthly candle turns positive with strong closing volume.
• Weekly KD forms a golden cross ( %K crosses above %D ) from oversold levels.
• Daily price recaptures and closes above the 20-day MA with bullish volume.
• Additional confirmation from RSI (rising above 50) or MACD (bullish crossover).

Until such signals appear, maintaining a defensive posture is essential. Traders should monitor these levels daily and avoid emotional decisions. Using alerts on trading platforms can help track when price or indicators cross key thresholds without constant screen time.

Practical Example: Applying the Framework on BTC/USDT

Suppose you are analyzing BTC/USDT and observe the following:

• The last three monthly candles are red, with decreasing highs and lows.
• On the weekly chart, the KD indicator shows %K (blue line) crossing below %D (red line) at a neutral level.
• The daily candle just closed at $58,000, while the 20-day MA sits at $59,200.

This confluence suggests strong bearish alignment. Your response should be:

• Exit any open long positions unless they are part of a long-term HODL strategy unaffected by short-term volatility.
• Place a stop-loss below $56,000 if holding for strategic reasons.
• Monitor the 20-day MA on the daily chart for any reclaim attempts.
• Wait for the weekly KD to exit the death zone and show upward momentum before reconsidering buys.

Using Binance or TradingView, you can set price and indicator alerts to notify you of changes without manual monitoring.

Frequently Asked Questions

What is the difference between a KD dead cross on weekly vs. daily charts?

A weekly KD dead cross reflects longer-term momentum shift and carries more significance than a daily one. While a daily dead cross may indicate short-term weakness, the weekly version suggests structural bearishness that can last weeks or months. Traders should prioritize weekly signals when aligning with higher timeframes.

Can I still hold my position if only two of the three conditions are met?

Yes, but with caution. If only two conditions are active—such as a monthly three red candles and a weekly dead cross—but the daily price remains above the 20-day MA, the short-term trend may still have resilience. However, increased vigilance is required, and reducing position size may be wise.

How do I set up a KD indicator on TradingView?

Click the “Indicators” button at the top of the chart, search for “Stochastic,” and select “Stochastic (KD).” The default settings (9,3,3) are standard. Adjust the timeframe to weekly to check for the dead cross. The %K and %D lines will appear below the price chart.

Does the 20-day moving average work the same on all cryptocurrencies?

The 20-day MA functions identically across all assets, but its effectiveness varies by liquidity and volatility. Major coins like BTC and ETH tend to respect this average more consistently than low-cap altcoins, which may whipsaw through it frequently. Always consider volume and market context.