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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 failed rally from key support and subsequent selloff on Friday, January 15, 2021. 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: Key Support Failed Early Before A Correction To Statistical Support
02/04/21 01:45:52 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 failed rally from key support and subsequent selloff on Friday, January 15, 2021. 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
| January 15 2021: The structural framework provided in Sharedata's Energy Daily Dashboard for Friday, January 15's auction was for price discovery higher. Our daily dual probability path assigned the primary expectation for price discovery higher, noting statistical resistance targets were: 54.60s/55.06s/55.53s, respectively. Qualitatively, these levels had held as support 50%, 86%, and 95% of recent market auctions (respectively) based on the market generated data. This data provided a buy-side framework with a probable resistance "zone" between 54.60s-55.06s. As discussed frequently, markets are probabilistic not deterministic. Within this framework, the secondary expectation was for price discovery lower. Statistical resistance targets resided at: 52.54s/52.08s/51.61s, respectively, with a probable resistance "zone" between 52.54s-52.08s. 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, key support failed during Friday's Globex auction, driving price lower to the 1SD Low target where sellers trapped, halting the selloff into the NY close. |
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| Figure 1. WTI Daily Dashboard 15 Jan 2021. |
| Graphic provided by: Sharedata Futures, Inc.. |
| |
| Heading into Friday's auction, a minor probe higher developed toward 53.80s during the Globex auction before buyers trapped at/near Thu's settlement. Selling interest then emerged there, driving price lower through key support, 53.30s, to 52.70s, signaling a failure of key support into the NY auction. Price discovery lower continued in NY trade to 51.83s just beyond Fri's 1SD Low target. Sellers trapped there before buy excess formed, halting the selloff as a minor retracement rally developed into the NY Close. |
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| Figure 2. WTI Daily Dashboard 14 Jan 2021. |
| 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 15 Jan 2021. |
| Graphic provided by: NinjaTrader. |
| |
| In this week's analysis, the primary expectation was for price discovery higher. Following the sell response in the Globex auction, a sell-side flip of the LOB had developed ahead of the NY open. Price discovery lower continued toward Fri's 1SD Low target. Sellers trapped there before a buy-side flip of the LOB formed, halting the selloff. A minor retracement rally then ensued to 52.50s ahead of the NY Close. |
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| Figure 4. WTI Limit Order Book 15 Jan 2021. |
| Graphic provided by: NinjaTrader. |
| |
| The daily framework identified both statistical support and resistance targets and their qualitative potential to hold. Key support failed early in the Globex auction resulting in a selloff toward the 1SD Low target. Sellers trapped there amidst large bid liquidity, halting the selloff 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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| Sharedata Futures, Inc. has not added any product or service information to TRADERS' RESOURCE. | |
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