#BTCReserveStrategy
How do you determine price correction before it happens?
1. Change in the momentum of the upward movement
When the market starts to rise, the candles are strong and accompanied by high trading volume.
But before a correction, you notice:
- Price Overextension: A rapid rise that diverges from moving averages.
- Decrease in trading volume: The rise continues but with less volume, indicating a loss of momentum.
- Formation of small or round candles: Indicates hesitation from buyers.
2. Technical indicators giving reversal signals
- RSI above 70: Considered overbought areas, especially if the level is repeated without breaking resistance.
- Negative crossover in MACD: The signal line crosses above the MACD line, suggesting a decline in momentum.
- Price significantly above the 20 or 50-period moving average: Increases the likelihood of returning to test it.
3. Formation of reversal patterns on the chart
- Head and Shoulders: A classic pattern that precedes a correction.
- Double Top: Failure to break resistance twice, signaling a decline.
- Ascending Channel: Remaining within the channel suggests upward movement, but nearing the upper edge increases the likelihood of correction.
4. Change in market structure
- Resistance turns into support: If the price breaks a resistance level and then returns to support it, this is considered confirmation of market strength.
- Failure to break a previous peak: Shows weakness from buyers, opening the door for correction.
