THESE Are The Candles That Matter
A Look At The Candlesticks Currently Controlling Bitcoin and Ethereum
IN TODAY’S REPORT
What we cover: Technical View edition. Controlling Candles revisited. Bulls at the gates.
TODAY’S TECHNICAL VIEW
So Much Noise
While the best of Crypto X (CX) features meaningful onchain, price, sentiment, and/or narrative insights about crypto assets, most of CX either perseverates on non evidence-based price predictions lacking any basis in probability or auto-DMs various promotional sh*tcoin pump & dump schemes. Much of CX is simply noise.
CX aside, even in a relatively liquid asset like Bitcoin, noise dominates price action. In fact, much of Bitcoin and Ether’s price action over the past several months can be attributed to surprisingly infrequent yet significant shifts in supply (seller aggression) and demand (buyer aggression) — infrequent signals amidst the noise.
For example, despite being more than a year since its formation, the June 2022 monthly bearish controlling candle continues to dominate current price action in both Bitcoin and Ether. Additionally, two different bullish controlling candles continue to act as key demand levels given potential further price deterioration for either Bitcoin or Ether.
So What’s A Controlling Candle?
The most significant supply and demand events lead to the formation of super expanded range candles (SERCs) — which when combined with multiple other factors — meet the definition of Controlling Candles, an analysis technique we’ve used for years. While today’s report simply reintroduces the technique, our charts and 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 either [1] at or near the start of a new swing move, typically being the first or second candle at the start of the move, [2] when major support is finally broken to the downside, or [3] when major resistance is finally broken to the upside
Controlling Candles are major Bull or Bear conquests, and mark shifts in territory which often last for several weeks to months. While these territorial conquests usually occur at lightening speed, the losing party typically spends the subsequent weeks to months in a tortuously fraught attempt to retake the lost ground.
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 also typically defended — though less reliably or forcefully — 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
Controlling candles typically form after familiar catalysts such as expected economic data releases and FOMC announcements, as well as around unanticipated news developments (think FTX or SEC enforcement actions).
BITCOIN (BTC/USD). Monthly Chart with Controlling Candles.
While most of our comments are left for the chart annotations, the June 2022 candle continues to reject Bitcoin price advances beyond its open. While we believe this dynamic will eventually shift — potentially with a countering bullish controlling candle and close solidly above 30,000 — the June 2022 candle continues to control current price action.
ETHEREUM (ETH/USD). Monthly Chart with Controlling Candles.
The June 2022 candle also controls the current Ether price action as all attempts to close above its open have been rejected (on a monthly basis) to date. The bull flag formation now evident in ETH (pale yellow highlight), however, may be the bulls amassing forces at the gates of this longstanding resistance.
As our statistical work has frequently shown in recent weeks, the evidence points north for both Bitcoin and Ether. While even high probability scenarios can and do fail to materialize at times, we may be seeing the bulls on the brink of an upside attack. Even powerful controlling candles can get overrun.
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