Should we turn to short position when the weekly line is Yin-enclosing Yang + the daily line falls below the 10-day moving average?

A weekly Yin-enclosing-Yang pattern combined with a daily close below the 10-day MA signals a strong bearish setup for shorting crypto, especially when confirmed by volume and market context.

Jul 07, 2025 at 02:51 am

Understanding the Weekly Yin-Enclosing-Yang Pattern

In technical analysis within the cryptocurrency market, candlestick patterns play a crucial role in predicting price movements. The Yin-enclosing Yang pattern on the weekly chart is a bearish reversal signal. It occurs when a large bullish (Yang) candle is completely "engulfed" by the following bearish (Yin) candle. This suggests that sellers have taken control after a period of buying pressure.

When this formation appears at the top of an uptrend or near significant resistance levels, it often indicates weakening buyer sentiment. In the context of crypto trading, where volatility is high and trends can reverse quickly, recognizing such a setup becomes critical for short-term traders looking to enter short positions.

Key Insight: The engulfing pattern gains more significance if accompanied by increased volume on the bearish candle, reinforcing the shift from bullish to bearish momentum.

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Daily Chart: Price Falling Below the 10-Day Moving Average

On the daily chart, a drop below the 10-day moving average (MA) serves as another bearish signal. The 10-day MA is a fast-moving average that closely follows price action, making it particularly useful for identifying short-term trend changes.

When the price closes below this average, especially after a sustained rally, it may suggest that buyers are losing grip. This could be due to profit-taking or increasing selling pressure from institutional players or algorithmic trading bots commonly found in crypto markets.

Technical Note: Traders should look for confirmation through multiple timeframes and ensure that the price remains consistently below the 10-day MA for at least two consecutive days before considering a trade entry.

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Combining Weekly and Daily Signals for Short Entry

The combination of a weekly Yin-enclosing-Yang and a daily close below the 10-day MA creates a potentially strong confluence for entering a short position. However, traders must not act solely based on these signals without further validation.

It's essential to assess other aspects such as:

• Market sentiment and news cycles
• Volume behavior across both timeframes
• Presence of key support/resistance zones
• Correlation with Bitcoin or Ethereum if trading altcoins

Risk Management Tip: Always place a stop-loss order above the recent swing high formed during the bullish phase to protect against false breakouts or reversals.

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How to Structure Your Short Trade Setup

If both conditions align, here’s how to structure your short trade effectively:

• Confirm the weekly Yin-enclosing-Yang pattern visually and via volume indicators.
• Ensure the daily chart shows a clear and confirmed break below the 10-day MA.
• Wait for a retest or pullback toward the 10-day MA as a potential entry point.
• Use additional tools like RSI or MACD to confirm overbought conditions or bearish divergence.
• Enter the short position with a tight stop-loss and define a realistic take-profit level based on prior support zones or Fibonacci extensions.

Entry Strategy: Consider partial entries to manage risk — one portion at the initial breakdown and another on a retest if available.

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Monitoring Post-Entry Behavior

After entering a short position, continuous monitoring is necessary. Key points to watch include:

• Whether the price continues to respect the 10-day MA as a resistance
• Any sudden surges in volume that might indicate a reversal
• News events or regulatory updates affecting the broader crypto market
• Movement in correlated assets like BTC or ETH

Adjustment Rule: If the price unexpectedly closes above the 10-day MA again, consider exiting part or all of the position to avoid being caught in a false signal.

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Frequently Asked Questions

Q: Can I apply this strategy to all cryptocurrencies?

While the Yin-enclosing-Yang and 10-day MA signals can appear across various assets, their reliability may vary depending on liquidity and market maturity. Larger-cap coins like BTC, ETH, and BNB tend to exhibit more predictable behavior compared to smaller altcoins.

Q: How long should I hold the short position once entered?

Short-term traders typically hold such positions for several days to a week. However, exit timing depends heavily on whether the expected bearish move unfolds or gets invalidated by new price action or external factors.

Q: Is this strategy suitable for beginners?

This approach requires a solid understanding of candlestick patterns, moving averages, and risk management. Beginners should practice on demo accounts and thoroughly backtest the strategy before deploying real capital.

Q: What if only one of the two signals appears?

A single signal isn’t enough to justify a confident short entry. Confluence increases the probability of success. If only one condition is met, it's better to remain neutral or use smaller position sizes with tighter stops.