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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 rally from key support on Wednesday, December 2, 2020. 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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ENERGY
WTI Weekly: Buyers Chasing Trend Trap Near Key Resistance Halting A Rally.
12/30/20 03:51:02 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 rally from key support on Wednesday, December 2, 2020. 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
| December 2, 2020: The structural framework provided in Sharedata's Energy Daily Dashboard for Wednesday 02 December's auction was for price discovery lower. Our daily dual probability path assigned the primary expectation for price discovery lower, noting statistical support targets were: 43.59s/43.31s/43.02s, respectively. Qualitatively, these levels had held as support 53%, 86%, and 100% of recent market auctions (respectively) based on the market generated data. This data provided a sell-side framework with a probable support "zone" between 43.59s-43.31s. As discussed frequently, markets are probabilistic not deterministic. Within this framework, the secondary expectation was for price discovery higher. Statistical resistance targets resided at: 45.51s/45.79s/46.08s, respectively, with a probable resistance "zone" between 45.51s-45.79s. 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. In this case, sellers trapped early during the Wednesday's Globex auction at/near key support before a rally phase ensued toward Wednesday's 1SD High target. |
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| Figure 1. WTI Daily Dashboard 02 Dec 2020. |
| Graphic provided by: Sharedata Futures, Inc.. |
| |
| Heading into Wednesday's auction, sellers trapped near key support during the Globex auction driving price higher to 44.70s ahead of the NY auction. Buying interest emerged there early in NY Trade, driving price higher to 45.92s near Wed's 1SD High target. Buyers then trapped there, halting the rally as a minor pullback developed into Tuesday's NY Close. |
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| Figure 2. WTI Daily Dashboard 01 Dec 2020. |
| Graphic provided by: Sharedata Futures, Inc.. |
| |
| The practice of analyzing market structure development 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 125 contracts) as well as the resting limit bids and offers allows us to see both the actions and intent of larger participants (who significantly affect price). |
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| Figure 3. WTI Auction 02 Dec 2020. |
| Graphic provided by: NinjaTrader. |
| |
| In this week's analysis, the primary expectation was for price discovery lower. Following the trapping of sellers near key support, a rally ensued through the NY auction toward Wed's 1SD High target. Buyers trapped there amidst selling interest and larger offer liquidity in LOB, halting the rally. A sellside flip of the LOB then occurred, and a pullback ensued into the NY close. Rather than blindly following trend, the market generated data provided insight at the high that the trend was at risk of ending in the near-term. |
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| Figure 4. WTI Limit Order Book 02 Dec 2020. |
| Graphic provided by: Sharedata Futures, Inc.. |
| |
| The daily framework identified both statistical support and resistance targets and their qualitative potential to hold. Key support held early in the Globex auction resulting in a rally toward the 1SD High target ahead of the NY close. 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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