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WTI Weekly: Key Support Fails As Correction Unfolds To Daily Statistical Support Target

05/01/20 05:48:44 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 buy-side continuation for Wednesday, March 17, 2020 which ultimately failed at statistical resistance. 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 17, 2020:

The structural framework provided in Sharedata's Daily Dashboard for Tuesday, March 17 was for price discovery higher. Our daily dual probability path assigned the primary expectation for price discovery higher, noting statistical resistance targets were: 30.54s/31.31s/32.07s, respectively. Qualitatively, these levels had held as resistance 55%, 90%, and 90% of recent market auctions (respectively) based on the market generated data. This data provided a buy-side framework with a probable resistance "zone" between 30.54s-31.31s. 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 26.86s-26.09s. 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. Despite the larger structural decline that was developing, market structure continued to support the most likely premise for buy-side continuation before resumption of the larger sell-side auction.

Figure 1. WTI Daily Dashboard Recap 17 Mar 2020.
Graphic provided by: Sharedata Futures, Inc..
Heading into Tuesday's auction, buying interest emerged late in Monday's auction near key support. Price discovery higher developed toward 30.30s into the London auction. Sell excess developed there, halting the rally phase near Tuesday's Average Daily Range High Target. Retracement then developed back toward key support, 28.45s, into the NY open. Balance developed early in the NY auction before selling interest emerged amidst a sell excess. A sell-side breakdown then ensued through key support, driving price lower to 26.84s near Tuesday's Average Daily Range Low Target into Tuesday's NY close.

Figure 2. WTI Daily Dashboard 16 Mar 2020.
Graphic provided by: Sharedata Futures, Inc..
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).

Figure 3. WTI Auction 17 Mar 2020.
Graphic provided by: NinjaTrader.
In this week's analysis, although the primary expectation was for price discovery higher (which did occur initially), the market provided order flow indication of the halting of that trend in the NY auction. The primary expectation for higher prices did unfold but was terminated as large offer liquidity emerged near 29.20s before selling interest absorbed all buying. A sell-side shift of the limit order book trend then developed as selling interest emerged that ultimately drove price lower back through prior key support toward daily statistical support into the NY close.

Figure 4. WTI Limit Order Book 17 Mar 2020.
Graphic provided by: NinjaTrader.
The order flow and limit order book data confirmed the initial buy-side development of the directional context provided by the market structure. The daily framework identified statistical resistance targets and their qualitative potential to hold as resistance. The order flow and limit order book data then indicated the halting of the buy-side sequence before the larger sell-side trend resumed. 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
E-mail address:

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