WTI Daily 03 October 2018: Liquidation Break Early, Buyside Breakout Attempt Above Major Supply

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Includes: BNO, DBO, DNO, DTO, DWT, OIL, OILD, OILK, OILU, OILX, OLEM, OLO, SCO, SZO, UCO, USAI, USL, USO, USOD, USOI, USOU, UWT, WTID, WTIU, XLE
by: Sharedata Futures

Summary

Globex balance around Tuesday’s NY close.

Selling interest early NY, price discovery lower into EIA release to 74.31s, buying interest there.

Rotation higher through the sell-side breakdown area, buyside breakout above major supply to 76.90s.

Wednesday’s auction reflected shakeout of weak long inventory during EIA before buy-side continuation ensued.

In this article, we examine the significant daily order flow and market structure driving WTI price action.

03 October 2018:

As noted in Tuesday’s WTI Daily, the highest probability path based on market structure for Wednesday’s auction was for price discovery higher within the developing balance area, 74.93s-75.91s. Rotation back to test the high and buy-side continuation did develop only after a liquidation break to 74.30s within prior key demand where a buy excess developed, 74.30s-74.80s.

WTI Daily Dashboard 02Oct18

Wednesday’s auction saw balance, 75.12s-75.57s, during Globex as key support held into the NY open. Minor rotation lower developed to 75s ahead of the EIA inventory release as initiative selling entered, 75s, before and during the EIA data release.

Bids pulled as an aggressive flush of the limit order book developed upon the EIA release (+7.9mil v +1.9mil expected). Price discovery lower developed, achieving the stopping point low, 74.30s, where buying interest emerged within prior key demand, halting the sell-side auction. A buy-side order flow sequence ensued, rejecting the low as a structural buy excess formed, 74.30s-74.80s, before price traded back above the sell-side breakdown area, 74.80s-75s. These developments were structural indications of potential for price discovery higher. Rotation higher then developed within prior balance, achieving a stopping point, 75.83s, within key supply. Buyers trapped there, driving price lower in pullback to 75s. Sellers trapped there amidst large bid liquidity as again the sequence shifted buy-side, driving price toward the high. Initiative buy programs entered, 75.50s/75.75s, driving price higher in buy-side continuation, achieving the stopping point high, 76.90s, just beyond Sharedata’s average daily range high target where responsive selling interest emerged ahead of the NY close, settling at 76.41s.

WTI Daily 03Oct18 NinjaTrader

As noted Tuesday, the highest probability path for Wednesday’s auction based on market structure was for rotation higher within the developing balance area, 74.93s-75.91s. Price discovery higher did develop following a liquidation break during the EIA release which formed a structural buy excess, setting the stage for further buy-side continuation. Price discovery higher did develop beyond the developing balance area in a buy-side breakout attempt above major supply as the market’s dual auction mechanism continues to seek a stopping point high.

Looking ahead, the highest probability path based on market structure for Thursday’s auction would be for challenge of the key buy-side breakout area, 75.90s-75.60s, to confirm or negate the buy-side breakout. Market structure and order flow will guide the way.

NinjaTrader

As noted in last week’s WTI Weekly, seasonal price weakness in confluence with continued extreme bullish posture in the Managed Money suggests headwinds for WTI trading beyond the key supply cluster overhead (72s-75s). Today’s auction saw a structural buy-side breakout attempt above major supply. Response to this breakout in the weekly context is now key. As noted last week, the coming days and weeks are a critical juncture for WTI in the larger context as the response to this cluster is key.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.