How to operate the monthly RSI overbought + weekly Yin line volume + daily line breaking through the 10-day line?

A monthly RSI above 70, weekly bearish candle with high volume, and daily close below the 10-day SMA signal a potential crypto downturn.

Jul 29, 2025 at 09:50 am

Understanding the Components of the Trading Strategy

This strategy combines three distinct technical indicators across different timeframes: the monthly RSI overbought condition, the weekly Yin (bearish) candlestick pattern with volume confirmation, and the daily price breaking below the 10-day moving average. Each element plays a critical role in identifying a potential reversal or downtrend in cryptocurrency prices. The Relative Strength Index (RSI) on the monthly chart helps determine long-term momentum exhaustion. When RSI exceeds 70, it is traditionally considered overbought, indicating that the asset may be overvalued and due for a correction.

The weekly Yin candle refers to a bearish candlestick where the closing price is lower than the opening price, suggesting selling pressure. When this occurs with above-average volume, it strengthens the bearish signal, implying institutional or large-scale selling. Lastly, the daily price breaking below the 10-day moving average acts as a short-term confirmation that momentum is shifting downward. Combining these signals across multiple timeframes increases the reliability of the trade setup.

Setting Up the Monthly RSI Overbought Signal

To identify the monthly RSI overbought condition, open your preferred cryptocurrency charting platform such as TradingView, Binance, or Bybit. Navigate to the monthly timeframe (1M) for the asset you are analyzing, such as Bitcoin or Ethereum. Apply the RSI indicator with the default period of 14. Wait for the RSI value to rise above 70. This level indicates that the asset has experienced strong upward momentum over the past several weeks and may be vulnerable to a pullback.

It is crucial to ensure that the RSI remains above 70 for at least one full monthly candle to avoid false signals from short-term spikes. You can confirm this by checking the RSI value at the close of the month. If the RSI is above 70 and the price is near a known resistance level or shows signs of exhaustion (like long upper wicks), the overbought signal gains strength. This does not mean an immediate sell-off will occur, but it sets the stage for a potential reversal when combined with other bearish signals.

Confirming the Weekly Bearish Candle with Volume

After identifying the monthly overbought condition, shift your focus to the weekly chart (1W). Look for a Yin (red or black) candle where the closing price is significantly lower than the opening price. This visual pattern indicates that sellers dominated the week. The presence of high trading volume during this candle is essential, as it confirms strong market participation in the sell-off.

To verify volume, ensure the volume bar for the current or most recent weekly candle is higher than the average of the previous 3–5 weeks. A sudden spike in volume during a bearish candle suggests that large traders or institutions may be exiting positions. This combination of bearish close + high volume increases the probability of a trend reversal. It is also helpful to check for additional bearish patterns such as a bearish engulfing, dark cloud cover, or shooting star on the weekly chart to strengthen the signal.

Monitoring the Daily 10-Day Moving Average Break

Once the monthly and weekly conditions are met, the final confirmation comes from the daily chart (1D). Add the 10-day simple moving average (SMA) to your chart. This moving average smooths out price data and acts as a dynamic support level during uptrends. When the price breaks below this line on a closing basis, it suggests short-term momentum has shifted bearish.

Wait for the daily candle to close below the 10-day SMA to avoid false breakouts caused by intraday volatility. For example, if Bitcoin closes below its 10-day SMA after several days of consolidation or lower highs, it confirms weakening bullish momentum. This break should occur within one to two weeks after the weekly Yin candle forms, ensuring the signals are aligned in time. The closer the timing between the weekly bearish signal and the daily breakdown, the stronger the setup.

Executing the Trade Based on the Combined Signals

When all three conditions are satisfied:

• Monthly RSI > 70
• Weekly bearish candle with high volume
• Daily close below 10-day SMA

You can consider entering a short position or reducing long exposure. On exchanges that support margin or futures trading, such as Binance or Bybit, open a short trade with a leverage appropriate to your risk tolerance. Set a stop-loss slightly above the recent swing high on the daily chart to protect against a false breakdown. For example, place the stop-loss 2–3% above the breakdown candle’s high.

Define a take-profit level based on key support zones from the past few months. Alternatively, use a risk-reward ratio of at least 1:2, meaning if you risk 5%, aim for a 10% profit. Monitor the trade daily and adjust stop-loss downward as the price declines to lock in profits. If you are not comfortable with shorting, consider exiting long positions or hedging with put options if available.

Backtesting the Strategy for Reliability

Before applying this strategy live, backtest it on historical data. Select major cryptocurrencies like BTC or ETH and review past monthly RSI readings above 70. For each instance, check whether a weekly Yin candle with high volume followed, and whether the daily price broke below the 10-day SMA shortly after. Record the outcomes: did the price decline by 10%, 20%, or more in the following weeks?

Use TradingView’s bar replay mode or Python-based backtesting tools like Backtrader to automate this process. Count the number of successful signals (price dropped significantly) versus false signals (price resumed upward). A win rate above 60% with favorable risk-reward suggests the strategy is viable. Adjust parameters if needed, such as requiring RSI above 75 for stronger overbought conditions or using a 5% price drop below the 10-day SMA for confirmation.

Frequently Asked Questions

What if the monthly RSI is overbought but the weekly candle is not bearish?

Wait for confirmation. An overbought RSI alone is not enough. The strategy requires all three conditions to align. Premature action may lead to losses if the trend continues.

Can this strategy be used on altcoins?

Yes, but with caution. Altcoins often have lower liquidity and higher volatility. Ensure the altcoin has sufficient trading volume and a reliable price history before applying this multi-timeframe approach.

How do I calculate the 10-day moving average manually?

Add the closing prices of the last 10 days and divide by 10. Most platforms do this automatically, but understanding the formula helps verify accuracy.

What time of day should I check for the daily close below the 10-day SMA?

Check after the UTC daily candle closes at 00:00. This ensures you are evaluating a complete candle rather than an incomplete one.