Most stock traders don’t lose because they enter a position too late. Instead, it’s because they pull the trigger on a promising setup too early, based on indicators like:
- A single MACD crossover.
- A quick RSI bounce.
- One green candle after a selloff.
That’s usually not enough to confirm a trade entry.
In this video clip from his recent technical analysis webinar, Senior Market Strategist John Rowland, CMT, explains how combining the Relative Strength Index (RSI) and MACD Oscillator can help traders more accurately identify the transition from downtrend to uptrend — instead of trying to predict a price bottom.
This isn’t about finding the first signal. Instead, it’s about waiting for the right one.
The First Crossover Is Usually a Trap
Let’s start with a common misfire: MACD crosses bullish below zero; RSI jumps quickly; and over-eager technical traders rush in.
But as John shows, that first crossover often lacks confirmation.
In many cases:
- RSI remains below 50
- Price struggles at resistance
- Volume doesn’t confirm
- The move reverses
That’s not a trend change; it’s a reflex bounce. And this is where discipline makes the difference.
If RSI fails to reclaim 50 and price rolls over, you exit – no debate about it. RSI becomes your risk management tool.
Why the Second Signal Is Often Stronger
The stronger setup usually comes later.
Here’s what John looks for:
- A second MACD crossover
- Higher low in price
- RSI reclaiming 50
- Volume expanding off the lows
That combination suggests something different: not just short-covering, but actual accumulation.
This is where momentum and structure begin to align. And that’s the transition traders should be looking to target.
RSI as Risk Management Tool
One of the most important takeaways: RSI is not just an entry signal. It also tells you when you’re wrong.
For example:
- You enter on a crossover
- RSI fails to hold above 50
- Momentum fades
- MACD threatens to roll back over
That’s your exit – clean, objective, and disciplined, with no emotional debate.
The Volume Factor Most Traders Ignore
John emphasizes that volume is critical for additional confirmation. Volume spikes at lows matter, particularly when there’s heavy volume into the low followed by a bullish crossover and RSI confirmation.
That volume surge increases the probability that weak hands are out and institutions may be stepping in.
Not all setups work. But high-volume reversals dramatically improve odds.
The Structural Breakout Matters Most
The most powerful signal occurs when there's a confluence of multiple indicators:
- MACD confirms
- RSI holds above 50
- Price breaks prior resistance
- A new higher high forms
That’s no longer a bounce. That’s a trend transition.
Lower highs → Higher lows → Breakout → Expansion
That’s the roadmap from downtrend to uptrend.
The Bottom Line
The best traders don’t try to predict bottoms. They wait for technical confirmation.
RSI + MACD together:
- Filter out false starts
- Improve trade timing
- Define risk
- Confirm structure
Momentum alone can be noisy. But momentum + structure is powerful.
Watch the RSI + MACD clip:
- Stream the full lesson on technical analysis for trade timing
- Turn on notifications to catch the next live webinar with John Rowland
On the date of publication, Barchart Insights did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
/AI%20(artificial%20intelligence)/3D%20Graphics%20Concept%20Big%20Data%20Center%20by%20Gorodenkoff%20via%20Shutterstock.jpg)
