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WTI Order Flow Weekly: A Look Into The Market Insights Into This Week's EIA Release

03/22/19 02:26:08 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 development of support for the Wednesday, March 20, 2019 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.

Security:   WTI
Position:   N/A

March 20, 2019:

Wednesday's auction saw Globex price discovery lower from Tuesday's settlement, 59.29s. The bulk of the sell-side activity developed during the London auction, achieving the Globex Stopping Point Low, 58.56s. Buying interest emerged there, rejecting the low as a buy excess (or buy tail) developed. This market development (evident in a TPO profile of the market data), provided structural indication and warning of a low hours ahead of the EIA release. The London buy excess held through the NY Open as a new buy excess also developed in NY, 58.68s-58.98s, ahead of the EIA release. These structural buy excesses were indication of potential for buy-side continuation.

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 graph (Figure 1), the development of the initial buy excess in London hours was followed by price discovery higher early in the NY auction. Failed selling activity at the NY Open drove price higher as the order book trend was buy-side. Price discovery higher developed toward 59.20s where selling interest emerged before buyers trapped amidst large offer liquidity. This event occurs approximately 30 minutes ahead of the weekly EIA release. Narrow, two-sided trade then developed, 59.20s-59.06s, into the EIA release. The LOB reflected large resting offer liquidity, 59.17s-59.20s, indicating intent of large sellers attempting to halt the auction there. This fact occurred within the structural context of two buy excesses below, a buy-side LOB trend, and no sell excess above. The most probable outcome was for price discovery higher based on the market generated data.

Figure 1. WTI Crude Auction 20Mar 2019 (right-click on chart and open in a new window to enlarge and view original size).
Graphic provided by: NinjaTrader.
Upon the EIA release (-9.5mil v +300k expected), large buying interest emerged at 59.20s. These buyers were willing to absorb the large resting offer liquidity evident in the LOB. The result was buy-side continuation, consistent with the larger structural context, as price flushed through the now thin LOB. Price discovery developed to 59.80s, where large offer liquidity halted the auction, driving price lower in pullback to test the breakout area, 59.20s-59.25s. Upon the pullback to 59.28s, large bid liquidity emerged at 59.27s before large buying interest emerged 59.35s. The pullback encountered buying interest, and the market subsequently rallied higher as buying interest absorbed the resting offer liquidity at each successive high into the London close period to 60.20s. Following another pullback late in the auction, the market ultimately closed at/near the high of the day.

Market structure provided the directional context (buy-side based on successive buy excesses). The order flow and limit order book data confirmed the buy-side development of the directional context provided by the market structure (buy excess). This structural development provided indication and warning of trend BEFORE the EIA release, based not on lagging price indicators but the transactional behavior and intent of significant quantity to drive 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
E-mail address:

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