Working Money magazine.  The investors' magazine. Advantage



Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?



WTI Weekly: Dual Probability Path Provides Insight Into Failure Of Key Market Level

10/31/19 04:46:36 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 breakdown below key support and subsequent sell-side price discovery for Wednesday, September 18, 2019's 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

September 18, 2019:

The structural framework provided in Sharedata's Daily Dashboard for Wednesday 18 September'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: 60.88s/61.66s/62.44s, respectively. Qualitatively, these levels had held as resistance 70%, 87%, and 92% of recent market auctions (respectively) based on the market generated data. This data provided a buy-side framework with a probable resistance "zone" between 60.88s-61.66s. As discussed frequently, markets are probabilistic not deterministic. Within this framework, the secondary expectation was for price discovery lower with a probable support "zone" between 57.80s-57.02s. 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.

Figure 1. WTI Daily Dashboard For September 18, 2019.
Graphic provided by: Sharedata Futures, Inc..
Heading into Wednesday's auction, price discovery lower developed from Tuesday's NY close as buyers trapped, driving price toward key support, 58.50s. Low volume buying interest emerged there, halting the buy-side sequence as balance developed, 58.30s-59.30s, into the London auction. Selling interest emerged late in the London auction near key support, driving price lower in sell-side continuation to 57.90s. Buying interest again emerged, halting the sell-side sequence as retracement developed through the EIA release back to key resistance, 58.60s-58.80s, overhead. Structural sell excess developed there, halting the buy-side sequence before price discovery lower resumed, driving price lower to 57.58s at/near Sharedata's average daily range low target ahead of Wednesday's NY close.

Figure 2. WTI Daily Auction September 18, 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 key market structure development was failure of the key support area, 58.50s, both late in the London auction and following the EIA release. This development was indication and warning that the primary daily inference (price discovery higher) was no longer likely. The failure of key support directed attention to key statistical support targets below: 57.80s/57.02s/56.24s, respectively. The market ultimately auctioned to 57.58s where sellers trapped halting the sell-side sequence near the average daily range low target. The statistical framework provided support targets which the market auctioned to intraday. Following the failure of key support in the NY auction post-EIA release, the trend of the LOB shifted into a downward trend, indicating the sell programs were dominant in this auction until the market reached statistical support.

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 fundamental data or media hype but rather structural formation and transactional behavior of significant quantity that drives price discovery.

Figure 3. WTI Limit Order Book (LOB) September 18, 2019.
Graphic provided by: NinjaTrader.

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:

Traders' Resource Links
Sharedata Futures, Inc. has not added any product or service information to TRADERS' RESOURCE.

Click here for more information about our publications!

Comments or Questions? Article Usefulness
5 (most useful)
1 (least useful)


S&C Subscription/Renewal

Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2021 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.