The Controlling Candles Of Bitcoin

Aug 10, 2023

IN TODAY’S REPORT

What we cover: Technical View edition. Noise. The REKTelligence Controlling Candle Analysis Technique preview. Bitcoin’s Controlling Candles.

TODAY’S TECHNICAL VIEW

A Brief Introduction To REKTelligence Controlling Candle Analysis

Despite all the elaborate theories, labored rhetoric, and tortured analysis, most market activity is simply noise. While noise itself remains a highly subjective concept related to timeframe and has competing mathematical definitions, much of Bitcoin’s action — particularly over the past several months — can be ascribed to shockingly infrequent major shifts in supply (seller aggression) and demand (buyer aggression).

As mentioned, these shifts are both meaningful and rare, often dominating subsequent market action for weeks to months. What occurs between each Controlling Candle? For the most part, we’d argue just lower order vacillation and noise.

`BITCOIN (BTC/USD). Weekly Chart with REKTelligence Controlling Candle Technique.`

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These major shifts occur around the familiar catalysts such as expected economic data releases and FOMC announcements, as well as around unanticipated news developments (think FTX or SEC enforcement actions).

The most significant supply and demand events lead to the formation of super expanded range candles — which when combined with multiple other factors — meet the definition of Controlling Candles, an analysis technique we’ve used for years and will soon formally present in a future report. While today’s report simply introduces the technique, our commentary will illustrate their power.

Informally, here are the basic qualities of a Controlling Candle:

Controlling Candles are super expanded range candles (SERCs)
Controlling Candle bodies often engulf several preceding candles
Controlling Candles ignite a new swing move or trend
Controlling Candles occur at or near the start of a new swing move, typically being the first or second candle at the start of the move
Controlling Candles are major Bull or Bear conquests, and mark shifts in territory which often last for several weeks to months
The opening price of a Controlling Candle is typically fiercely defended — often multiple times — by the controlling party
The midpoint of a Controlling Candle’s body is typically defended — though less reliably — by the controlling party
Once a Controlling Candle’s opening price gets surpassed on a closing basis (i.e., the opposing party manages to overrun the enemy’s defense of the Controlling Candle’s open), this shift in territorial power often — but not always — leads to the formation of a new Controlling Candle in the opposite direction

Now let’s turn to today’s weekly chart of Bitcoin. Pay special attention to the opening price and approximate midpoint of each of the Controlling Candles highlighted in yellow. Over the past year, just five weekly candles define the majority of market action. That’s just five out of the sixty-one candles shown on the chart.

While the opening price is arguably the most important price, it’s the approximate midpoints where many reversals occur.

As we approach the temporal midpoint of August, note that Bitcoin may soon retest the midpoint of the recent June weekly Controlling Candle. Considering the historic low extremes in the volatility measures we’ve featured of late, a potential retest could really set the stage. For what, you ask? For Bitcoin’s next major swing. Perhaps for Bitcoin’s next trend. Either way, for Bitcoin’s next Controlling Candle. Let’s go.

THE TLDR

A Few Key Takeaways

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✔ Much of Bitcoin’s action — particularly over the past several months — can be ascribed to shockingly infrequent major shifts in supply and demand
✔ The most significant supply and demand events lead to the formation of super expanded range candles — which when combined with multiple other factors —  meet the definition of Controlling Candles
✔ The opening price of a Controlling Candle is typically fiercely defended — often multiple times — by the controlling party
✔ The midpoint of a Controlling Candle’s body is typically defended — though less reliably — by the controlling party

peace_love_crypto

-DB

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IMPORTANT DISCLAIMER

The information presented and made available in this newsletter is intended for educational purposes only. THE INFORMATION IS NOT AND SHOULD NOT BE CONFUSED WITH INVESTMENT ADVICE AND DOES NOT ATTEMPT OR CLAIM TO BE A COMPLETE DESCRIPTION OF ANY SPECIFIC COINS, TOKENS OR MARKETS OF ANY KIND, BUT RATHER EDUCATIONAL EXAMPLES OF THE APPLICATION OF TECHNICAL ANALYSIS AND QUANTITATIVE ANALYSIS TO THE MARKET. This information has been presented and prepared without regard to any particular person's investment objectives, financial situation and particular needs because as individuals come from diverse backgrounds, with diverse objectives and financial situations. This information is of a general nature only so you should seek advice from your investment advisor or other financial professional as appropriate before taking any action. The opinions and analyses included herein are based on sources and data believed to be reliable and are presented in good faith, however no representation or warranty, expressed or implied is made as to their completeness or accuracy. It is imperative to understand your investment risks since all stock investments involve significant risk. The user of REKTelligence’s newsletters, podcasts, courses, coaching and other educational services agrees to indemnify and hold harmless REKTelligence LLC from and against any and all liabilities, expenses (including attorney's fees), and damages arising out of claims resulting from the use of this educational content. REKTelligence LLC is not a licensed investment advisor.