WTI Weekly: False Breakdown Early Week, Price Discovery Higher To 55.66s

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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
by: Sharedata Futures
Summary

False breakdown in Monday’s auction to 51.33s, buy excess develops there.

Rotation higher through mid-week, buy-side breakout Thursday/Friday and price discovery higher to 55.56s.

This week saw a false breakdown below last week’s balance before rotation higher developed to 55.66s into week’s end.

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

As noted in last week’s WTI Weekly, the primary expectation for this week was for sell-side activity provided the near-term stopping point high, 54.52s, held. This expectation did not play out as a false breakdown developed early week at key support, 51.85s. Rotation back through the developing balance occurred through mid-week before a buy-side breakout and price discovery higher developed to 55.56s into week’s end.

WTI Composite 25Jan19

27 January-01 February 2019

This week’s auction saw selling interest in Monday’s trade as a sell-side breakdown attempt through key support, 51.85s, developed, achieving the stopping point low, 51.33s. Buying excess emerged there, rejecting the low, as buying interest in size, 51.54s-51.70s, drove price back into prior balance. This structural development was indication of a false breakdown and implied potential price discovery higher. Price discovery higher developed through Tuesday and Wednesday’s auctions as the market challenged key resistance to 54.93s. Buyers trapped there as a pullback developed to 54s into early Thursday’s auction.

Following Thursday’s pullback to key demand, 54s, buying interest emerged there, driving price higher in minor range extension to 55.37s. Buyers trapped there in size, driving price lower once again back into the key demand cluster, 54s-53.50s, ahead of Friday’s auction. A minor probe lower developed early in Friday’s auction to 53.37s. Minor buying excess developed there before buying interest drove price higher to challenge Thursday’s stopping point, achieving the weekly unsecured stopping point high, 55.66s, ahead of Friday’s close, settling at 55.26s.

WTI Weekly I 01Feb19 NinjaTrader

As noted last week, this week’s primary expectation was for sell-side activity provided key resistance, 54.51s, held as resistance. This expectation did not play out as an early week false breakdown resulted in rotation back through the developing balance to challenge key resistance. The false breakdown provided structural indication and warning of potential buy-side activity. Buying interest emerged at key resistance, driving price modestly higher to 55.66s ahead of the week’s close.

Looking ahead, this week’s failed sell-side breakdown and price discovery higher through prior resistance indicates that the market continues to seek selling interest sufficient to halt the buy-side auction. Focus into next week centers upon response to this week’s buy-side breakout area, 54.50s-54s, for confirmation/negation of the buy-side activity. This area coincides with the larger supply cluster, 50s-54.50s, from late November-early December 2018. The primary expectation near-term (2-4 weeks) based on market structure is now buy-side provided key demand holds. This week’s price discovery higher develops at major supply following a substantial buy-side phase (approximately +30% as of this writing).

WTI Weekly II 01Feb19 NinjaTrader

Following the partial US government shutdown, the CFTC has resumed publishing the weekly COT report. The publishing resumes with late December’s data and will be lagging for the next two to three weeks (releases on Tuesdays and Fridays until current) as they catch up. Our data will update with their publishing schedule.

WTI COT 24Dec18

The market structure, order flow, and leveraged capital posture provide the empirical evidence needed to observe where asymmetric opportunity resides.

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.