Monthly line stands firmly on the annual line and superimposes the layout opportunity of the daily line breaking through the descending pressure line

When the monthly close holds above the 200-month SMA and the daily price breaks a descending trendline with volume, it signals strong multi-timeframe bullish momentum.

Jul 30, 2025 at 07:15 am

Understanding the Monthly Line Anchored on the Annual Line

When traders observe that the monthly line stands firmly on the annual line, it signifies a strong foundational support in long-term market structure. The annual line, typically represented by the 200-month simple moving average (SMA), acts as a critical benchmark for determining the overall health of a cryptocurrency’s price trend. A monthly closing price holding above this long-term average reflects sustained bullish sentiment across a year-long horizon. This kind of stability suggests that large institutional or long-term investors are accumulating or maintaining positions, reducing the likelihood of a deep bearish reversal.

The significance of the monthly line holding above the 200-month SMA lies in its ability to filter out short-term noise. In volatile crypto markets, weekly or daily price swings can mislead traders, but a stable monthly close reinforces confidence. When this occurs, it often sets the stage for higher time frame breakouts, especially when combined with other technical confirmations such as volume expansion or momentum shifts on lower time frames.

Daily Line Breaking Through the Descending Pressure Line

A daily line breaking through a descending pressure line is a pivotal technical event indicating a potential shift from bearish to bullish momentum. A descending pressure line, or descending trendline, is drawn by connecting two or more price highs that slope downward. This line acts as dynamic resistance. When the price of a cryptocurrency closes above this trendline on the daily chart, particularly with increased trading volume, it signals that selling pressure is weakening and buyers are gaining control.

To identify this breakout correctly:

• Draw the descending trendline by connecting at least two significant swing highs.
• Ensure the price closes decisively above the trendline, not just a brief wick.
• Confirm with rising volume on the breakout day to validate participation.
• Watch for a retest of the former resistance (now support) in the days following the breakout.

This type of breakout is especially powerful when it occurs after an extended downtrend and aligns with higher time frame support, such as the monthly line holding on the annual average.

Superimposing the Monthly and Daily Structures

The convergence of the monthly line anchored on the annual line and the daily breakout above a descending trendline creates a high-probability alignment across multiple time frames. This multi-timeframe confluence enhances the reliability of the trading signal. Traders use such setups to identify not just short-term reversals but potential medium- to long-term trend changes.

To analyze this superimposition:

• Begin by examining the monthly chart to confirm that the closing price remains above the 200-month SMA.
• Shift to the daily chart and identify the presence of a well-defined descending trendline.
• Observe whether the most recent daily candle has closed above this trendline.
• Check for supporting indicators such as RSI moving above 50 or MACD crossing into positive territory.

When both the long-term foundation and short-term momentum align, the probability of sustained upward movement increases. This setup is often referred to as a "springboard" pattern, where long-term support provides the base, and the daily breakout acts as the trigger.

Practical Steps to Trade This Setup

Executing a trade based on this technical configuration requires precision and risk management. Below are the detailed steps:

• Confirm the monthly structure: Open the monthly chart and verify that the latest close is above the 200-month SMA. Use a crypto charting platform like TradingView and input the symbol (e.g., BTCUSD) to access monthly data.
• Draw the descending trendline on the daily chart: Switch to the daily timeframe. Click the trendline tool, place the first point on a major swing high, then extend it to at least one additional lower high. The line should slope downward.
• Wait for a confirmed breakout: Do not enter immediately on an intraday move. Wait for the daily candle to close above the trendline. For example, if today’s high breaks the line but the candle closes below, do not act.
• Check volume and momentum: Use the volume indicator below the chart. The breakout day should show volume at least 20% above the 20-day average. Add RSI to confirm momentum is shifting upward.
• Set entry and stop-loss: Enter a long position at the close of the breakout candle or on the next open. Place a stop-loss just below the breakout point or the nearest swing low.
• Define take-profit levels: Use Fibonacci extensions from the recent downtrend’s start to end. Common targets are 1.618 and 2.618 extensions.

Using a limit order instead of a market order helps avoid slippage, especially in less liquid altcoins.

Common Pitfalls and How to Avoid Them

Even with a strong setup, false signals can occur. One major risk is a fakeout, where the price briefly moves above the descending trendline but quickly reverses. To avoid this:

• Require a minimum 2% close above the trendline, not just a touch.
• Wait for the next day’s confirmation candle to remain above the breakout level.
• Avoid trading during low-volume periods such as weekends or holidays.

Another mistake is ignoring the broader market context. If Bitcoin is in a strong downtrend, even a well-structured altcoin breakout may fail. Always check BTC dominance and overall market sentiment before entering.

Overleveraging is another danger. Because the setup appears strong, traders might allocate too much capital. Instead, risk no more than 2% of the trading account on a single trade.

Frequently Asked Questions

What if the monthly line touches the annual line but doesn’t close above it?

A touch without a close above the 200-month SMA is not a confirmed hold. It may indicate temporary support, but without a monthly close above, the long-term trend remains questionable. Wait for a confirmed monthly close to validate strength.

Can this setup occur in bear markets?

Yes, counter-trend rallies can mimic this pattern. However, in a strong bear market, even if the monthly line holds and a daily breakout occurs, the rally may be short-lived. Always assess macro conditions like exchange inflows, funding rates, and on-chain metrics.

How do I adjust this strategy for altcoins?

Altcoins often exhibit higher volatility. Use the same structure but apply stricter volume confirmation. Also, ensure Bitcoin is not in a sharp downtrend, as altcoins typically follow BTC’s lead.

Is the 200-month SMA the only long-term indicator to use?

While the 200-month SMA is widely followed, some traders also monitor the 200-week SMA or on-chain metrics like the MVRV ratio. However, the 200-month SMA remains a standard benchmark for monthly structural analysis.