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by Taylor Ireland
In this article, we examine the order flow and limit order book data in the WTI futures market that provides insight into the establishment of a structural low and subsequent buy-side price discovery for Tuesday, August 13, 2019's auction. Market structure and order flow provide insight into the actual transactional activity of a dual-auction's price discovery process. Analysis of this data provides real-time insight into the actions of market participants, providing a dynamic dataset to inform one's risk management process.
Position: N/A
Taylor Ireland
Sharedata Futures, Inc. provides historical data mining and visualization for the benchmark NYMEX Energy Futures Markets.
Sharedata combines structural analysis of the market generated data, dynamic systems analysis, and Bayesian causal inference techniques favored by the scientific and intelligence communities to provide a robust framework for addressing the uncertainty and risk in energy pricing.
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DAY TRADING
WTI Weekly: Bullish Market Structure Guides Way To Buy-Side Continuation
08/30/19 12:41:31 PMby Taylor Ireland
In this article, we examine the order flow and limit order book data in the WTI futures market that provides insight into the establishment of a structural low and subsequent buy-side price discovery for Tuesday, August 13, 2019's auction. Market structure and order flow provide insight into the actual transactional activity of a dual-auction's price discovery process. Analysis of this data provides real-time insight into the actions of market participants, providing a dynamic dataset to inform one's risk management process.
Position: N/A
| August 13, 2019 The structural framework provided in Sharedata's Daily Dashboard for Tuesday August 13's auction was for price discovery higher based on prior structural low development at 50.60s and subsequent buy-side sequence toward key resistance, 55.70s. Our daily dual probability path assigned the primary expectation for price discovery higher, noting statistical resistance targets were: 56.38s/57.21s/58.05s, respectively. Qualitatively, these levels had held as resistance 66%, 87%, and 96% of recent market auctions (respectively) based on the market generated data. This data provided a buy-side framework with a probable resistance "zone" between 56.38s-57.21s. This type of daily framework, while useful, is more effective when using live order flow and structural analysis to confirm or negate the most probable daily inference. |
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| Figure 1. WTI Daily Dashboard For August 13. |
| Graphic provided by: Sharedata Futures, Inc.. |
| |
| Heading into Tuesday's auction, Monday's key resistance, 55.20s, was probed and held as resistance during the London auction. Minor price discovery lower ensued to 54.21s where sellers were trapped amidst the formation of a structural buy excess, halting the sell-side sequence. Buying interest then entered early in the NY auction, driving price back to re-test key resistance at 55.30s. Buying interest emerged there amidst a buy-side breakout as price discovery higher developed, ultimately achieving the daily high, 57.47s, at/near Tuesday's 1st standard deviation high target (57.21s). Selling interest emerged there, halting the buy-side sequence into the London close as narrow balance developed, 57.47s-56.90s, into the NY close. |
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| Figure 2. WTI Daily Auction for August 13. |
| Graphic provided by: NinjaTrader. |
| |
| The practice of analyzing market structure developments is best accomplished with the use of order flow and limit order book (LOB) analysis. In short, plotting the buy and sell transactions of significance (in this case volume equal to or greater than 150 contracts) as well as the resting limit bids and offers (equal to or greater than 75 contracts) allows us to see both the actions and intent of larger participants (who significantly affect price). |
| In this week's analysis, the key market structure development was the buy excess, 54.21s-54.40s, developed in the London auction where large sellers trapped (evident in the LOB). This development was indication and warning that the primary daily inference (price discovery higher) remained likely (in spite of overnight, low volume selling interest). The statistical framework provided resistance targets which the market auctioned to intraday. Following the development of the buy excess in the London auction, the trend of the LOB shifted into an upward trend early in the NY auction, indicating the buy programs were dominant in this auction until the market reached statistical resistance. |
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| Figure 3. WTI Limit Order Book August 13. |
| Graphic provided by: NinjaTrader. |
| |
| The order flow and limit order book data confirmed the sell-side development of the directional context provided by the market structure. The daily framework identified statistical resistance targets and their qualitative potential to hold as resistance. This confluence of structural, statistical, and order flow data provided insight into the auction's outcome based not on lagging fundamental data or media hype, but rather structural formation and transactional behavior of significant quantity that drives price discovery. |
Sharedata Futures, Inc. provides historical data mining and visualization for the benchmark NYMEX Energy Futures Markets.
Sharedata combines structural analysis of the market generated data, dynamic systems analysis, and Bayesian causal inference techniques favored by the scientific and intelligence communities to provide a robust framework for addressing the uncertainty and risk in energy pricing.
| Title: | Founder |
| Company: | Sharedata Futures, Inc. |
| Dallas, TX | |
| Website: | www.sdfanalytics.com |
| E-mail address: | support@sdfanalytics.com |
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| Sharedata Futures, Inc. has not added any product or service information to TRADERS' RESOURCE. | |
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