WTI Weekly: Balance Development Continues Under Key Stopping Point High, 64.79s

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

Sellers trap in Monday’s auction near 63.03s forming a pullback low, balance developed through Tuesday’s auction.

Price discovery higher developed mid-week, testing key resistance where sell excess formed as key resistance held.

This week saw development of a pullback low early week before rotation higher to test key resistance resulted in selling interest and continued balance development.

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 following the recent development of a stopping point high, 64.79s. This expectation did not play out as sellers trapped early week, 63.10s/63.15s/63.20s, halting the sell-side sequence. Narrow balance ensued before rotation higher mid-week developed, achieving the weekly stopping point high, driving price higher to 64.79s. Minor sell excess developed in Wednesday’s auction as balance developed, 64.70s-63.55s, ahead of Thursday’s close, settling at 64.02s.

WTI Composite 12Apr19

Sharedata Futures, Inc.

14-18 April 2019

This week’s auction saw minor price discovery lower early week through last week’s key support, achieving a stopping point, 63.03s, in Monday’s auction. Sellers trapped, 63.10s-63.20s, halting the sell-side sequence as balance ensued into Tuesday’s auction. A minor probe lower developed, achieving the weekly stopping point low, 62.99s. Rejection of the low ensued, driving price higher to 64.65s into Tuesday’s NY close as May-June contract roll developed.

Minor range extension higher developed early in Wednesday’s auction, achieving the weekly stopping point high, 64.72s, near key resistance. Structural sell excess developed there as rotation lower developed through the EIA release (-1.3mil vs. +1.7mil exp), achieving a stopping point, 63.66s. Minor price discovery lower developed early in Thursday’s trade to 63.55s. Minor buy excess developed, driving price higher, developing balance, 63.55s-64.24s, ahead of Thursday’s close, settling at 64.02s.

WTI Weekly 18Apr19 NinjaTrader

As noted last week, this week’s primary expectation was for sell-side activity. This probability path did not play out as minor price discovery lower developed early week to 63.10s-63s, where sellers trapped, halting the sell-side before balance ensued into week’s end. This week’s rotation was below the average weekly range expectancy (388 ticks).

Looking ahead, this week’s sell-side defense of key resistance at 64.72s is of structural significance. Focus into next week remains upon response to the maturing, two-week, multi-day balance, 64.79s-62.99s. Buy-side failure to drive price higher from this balance will target key demand clusters below, 62.90s-61.80s/60.30s-58s, respectively. Alternatively, sell-side failure to drive price lower from this balance will target key supply overhead, 64.50s-65.75s/66.60s-68.15s, respectively. As noted in recent weeks, the market has auctioned toward larger key supply overhead following an approximately 53% buy-side phase from December 2018. Given this week’s sell-side defense at key resistance upon this week’s relief rally, the primary expectation, near-term (2-4 weeks), based on market structure remains neutral to sell-side.

WTI Weekly II 18Apr19 NinjaTrader

It is worth noting that despite the approximately 52% price rally from December lows, market leverage (Open Interest) continues to decline. Interestingly, MM Long posture has seen an upside break of trend in the last two months or so of data amidst continued relative concentration of long posture amidst the MM participants. Further, MM short posture has migrated toward levels that typically result in the development of structural high formations. Declining overall open interest, increasing MM long posture, and declining MM short posture warrants caution on the buy-side at these price levels. However, until the MM Long and Short Trends reverse, the highest probability path remains for price discovery higher within the major supply area.

WTI COT Weekly 19Apr19 Sharedata Futures, Inc.

It is also worth noting that the MM net long length in gasoline is reaching bullish extreme posture. Buy-side herding is developing in both WTI and a key refined product, gasoline. Another qualitative data point warranting caution on the buy-side at these levels.

RB COT Weekly 19Apr19

Sharedata Futures, Inc.

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.