MACD Sees Through the Main Force's Washout Scam

🟧Divergence Phenomenon

1/Bullish Divergence

In the process of a price decline, if the price reaches a new low but the MACD indicator's DIF line or MACD histogram does not simultaneously reach a new low, this is known as a bullish divergence. This often indicates that the downtrend in price is about to end, and the main force may be conducting a final washout by pressing down the price.

For example, if the price drops from 10 yuan to 8 yuan, then to 7 yuan, continuously creating new lows, but at this time, the MACD's DIF line gradually rises from -0.5 to -0.3, a bullish divergence appears. This indicates that although the price is declining, the momentum of the decline is weakening, and the main force may be secretly accumulating, leading to a likely reversal and entering a main uptrend.

2/Bearish Divergence

In the process of a price increase, if the price reaches a new high but the MACD indicator's DIF line or MACD histogram does not simultaneously reach a new high, this is known as a bearish divergence.

However, during the washout operations before a main uptrend, the main force may create a short-term illusion of a bearish divergence. At this time, it is necessary to combine the price's position and other indicators for a comprehensive judgment.

If the price appears to have a bearish divergence at a relatively low level, but there are no obvious signs of a significant increase in trading volume, and other technical indicators do not show clear sell signals, then this may be a washout tactic by the main force aimed at scaring off investors who do not have a comprehensive technical analysis.

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