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DAY TRADING


WTI Weekly: Key Resistance Held Targeting Statistical Support Below

11/21/19 04:37:37 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 defense of key resistance and subsequent price discovery lower for Tuesday, September 24, 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 Tuesday 24 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: 60.18s/60.95s/61.73s, 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 60.18s-60.95s. 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 57.10s-56.33s. 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 24 September 2019.
Graphic provided by: Sharedata Futures, Inc..
 
Heading into Tuesday's auction, price discovery lower developed from Monday's NY close as buyers trapped near key resistance, 58.70s, driving price lower to 57.87s ahead of the NY open. Sellers were trapped there as balance developed, 57.80s-58.24s, into early NY trade. Buyers trapped near 58.24s before price discovery lower resumed toward 57.40s. Sellers trapped there, halting the sell-side sequence as retracement developed back toward 58.25s, key resistance overhead. The buy-side failed to drive price higher from key resistance and price discovery lower resumed, achieving the stopping point lower, 56.85s, near Sharedata's average daily range low target. Sellers were trapped there amidst buy excess, halting the sell-side sequence ahead of Tuesday's NY close.

Figure 2. WTI Daily Auction 24 September 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 buy-side early in Tuesday's Globex auction. 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: 57.10s/56.33s/55.55s, respectively. The market ultimately auctioned to 56.85s where sellers trapped, halting the sell-side sequence near the average daily range low target and the daily NY average daily range expectancy (154 ticks). The statistical framework provided support targets which the market auctioned to intraday. Following the buy-side failure at key resistance in the Globex auction, 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.

Figure 3. WTI Limit Order Book 24 September 2019
Graphic provided by: NinjaTrader.
 
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.



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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