WTI Weekly: Prior Key Resistance Becomes Support As Rally Continued To Statistical Resistance.

04/08/21 04:21:55 PM

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 breakout through key resistance and subsequent rally on Friday, March 5, 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.

Security: WTI
Position: N/A

March 5, 2021:

The primary expectation in Sharedata's Energy Daily Dashboard for Friday 05 March 2021'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: 65.13s/65.58s/66.04s, respectively. Qualitatively, these levels had held as support 50%, 78%, and 100% of recent market auctions, respectively, based on the market generated data. This data provided a buy-side framework with a probable resistance "zone" between 65.13s-66.04s. As discussed frequently, markets are probabilistic not deterministic. Within this framework, the secondary expectation was for price discovery lower. Statistical support targets were: 62.53s/62.08s/61.62s, respectively, with a probable support "zone" between 62.53s-61.62s. 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 (prior resistance) held during Monday's Globex auction, driving price higher to both the Daily 2SD and Weekly 1SD High targets into the NY close.

Figure 1. WTI Daily Dashboard 05 Mar 2021.

Graphic provided by: Sharedata Futures, Inc..

Heading into Friday's auction, buying interest amidst excess formed early during the Globex auction, driving price higher to 65.77s near Fri's 1SD High target as a Gap Higher Open formed into the NY auction. Buying interest emerged early in NY trade, driving price higher to 66.40s at/near both Fri's 2SD High and Weekly 1SD High targets. Selling interest emerged there, halting the rally into the NY Close.

Figure 2. WTI Daily Dashboard 04 Mar 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).

Figure 3. WTI Daily Auction 05 Mar 2021.

Graphic provided by: NinjaTrader.

In this week's analysis, the primary expectation was for price discovery higher. Following the buying interest near key support in the Globex auction, there was a buy-side flip of the LOB near key support (prior resistance) early in NY trade, driving price higher to 66.20s, near both Fri's 2SD High and the Weekly 1SD High targets. Selling interest emerged amidst excess, driving price lower toward 65.50s. Buying interest then emerged there amidst a buy-side flip of the LOB before the resumption of the trend higher occurred. The rally continued to 66.40s at/near the Weekly 1SD High target. Selling interest emerged there as a sell-side flip in the LOB developed, halting the rally ahead of the NY close.

Figure 4. WTI Limit Order Book 05 Mar 2021.

Graphic provided by: NinjaTrader.

The daily framework identified both statistical support and resistance targets and their qualitative potential to hold. Key support (prior resistance) held early in the Globex auction resulting in a rally toward both the Daily 2SD High and Weekly 1SD High targets. 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.

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.

Title:	Founder
Company:	Sharedata Futures, Inc.
	Dallas, TX
Website:	www.sdfanalytics.com
E-mail address:	support@sdfanalytics.com
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WTI Weekly: Prior Key Resistance Becomes Support As Rally Continued To Statistical Resistance.

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