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WTI Order Flow Weekly: A Double-Top Confirmed By Order Flow Sees Price Discovery Lower

05/02/19 04:32:23 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 sell-side price discovery and development of support for Monday, April 15, 2019. 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

April 15, 2019

The structural framework provided in Sharedata's Daily Dashboard for Monday, April 15's auction was for price discovery lower. Our daily statistical support targets were: 62.92s/62.67s/62.42s. Qualitatively, these levels had held as supports 42%, 14%, and 5% (respectively) of recent market auctions based on the market generated data. This data provided a sell-side framework with a probable support "zone" between 62.92s-62.42s. This type of daily framework, while useful, is made more effective when using live order flow and structural analysis to confirm or negate the most probable daily inference.

Figure 1. WTI Daily Dashboard For April 15, 2019.
Graphic provided by: Sharedata Futures, Inc..
Price discovery higher developed early during the NY auction, achieving a stopping point at 63.75s. Selling interest emerged amidst large offer liquidity halting the buy-side sequence. A "double top" developed within this context. Price discovery lower ensued toward key support at 63.35s-63.30s. Buyers trapped there amidst selling interest as sell-side continuation ensued, achieving the daily stopping point low of 63.03s, near Sharedata's average daily range low target (62.92s). Sellers trapped amidst large bid liquidity, halting the sell-side sequence near statistical support. Price discovery higher then ensued as a VWAP retracement developed into the NY close.

Figure 2. WTI Daily April 15, 2019.
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 development of the "double-top" (confirmed by order flow and LOB activity) early in the NY auction provided indication that key support would be re-tested within the context of price discovery potential toward the daily statistical supports. Price discovery lower did unfold toward key statistical support where sellers in size trapped amidst large bid liquidity, evident in the LOB. This event resulted in the development of the daily support before VWAP retracement unfolded into the NY close.

Market structure provided the directional context (sell-side based on Friday's sell spike). 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 support targets and their qualitative potential to hold as support. This confluence of structural, statistical, and order flow data provided insight into the auction's outcome based not on lagging price indicators but rather structural formation and 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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