Navigating the Rally: Don't Just Ride, Understand!
The market's buzzing, and green candles are everywhere! While it's exciting to see your portfolio grow, a true trader understands that a rally isn't just about going up; it's about discerning sustainable growth from speculative frenzy.
Key Technical Indicators to Watch During a Rally:
Volume Confirmation: A healthy rally is often backed by strong trading volume. If prices are surging but volume is flat or declining, it might indicate a lack of conviction and a potential for a reversal. Look for expanding volume alongside price increases.
RSI (Relative Strength Index): While an uptrend might push the RSI into overbought territory (>70), watch for "hidden bearish divergences." This is when the price makes a higher high, but the RSI makes a lower high – a potential sign that momentum is waning despite price action.
Moving Averages (e.g., 50-day & 200-day SMA): In a strong rally, prices typically stay above key moving averages. A significant break below a commonly watched MA could signal a loss of strength or the beginning of a correction. Also, look for these MAs to be acting as dynamic support.
Your Takeaway: Don't just FOMO into every pump. Use technical analysis to confirm the strength of the rally and protect your gains. A smart trader knows when to enter, and more importantly, when to take profits!