WTI Weekly: Balance Early Week Before Buy-Side Breakout Into Week's End

Includes: OIL, USO
by: Sharedata Futures

Rotation higher in Monday’s auction to 63.33s testing last week’s resistance, selling interest there.

Pullback into mid-week to 60.64s, buying interest there and price discovery higher to 62.92s into week’s end.

This week saw balance development amidst June-July contract roll before price discovery higher developed into week’s end.

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

The primary expectation for this week was for sell-side activity following last week’s balance development and sell excess formation, 62.95s-62.50s. This expectation did not play out as a re-test of last week’s resistance developed early week before a pullback to key demand resulted in buying interest, ultimately driving price higher to 63.82s ahead of Friday’s close, settling at 62.92s.

WTI Composite 10May19 Sharedata Futures, Inc.

12-17 May 2019

This week’s auction saw buying interest early week as last Friday’s late sellers failed to hold the auction. Aggressive price discovery higher ensued in Monday’s auction, achieving a stopping point, 63.33s. Sell excess developed there amidst the trapping of buyers, within prior key supply, 62.70s-63.90s. Price discovery lower developed through the remainder of Monday’s trade, achieving the weekly stopping point low, 60.64s, near last week’s key support. Low volume buying interest emerged there, developing balance, 60.64s-62.11s, through Tuesday’s auction as the June-July contract roll dominated the auction.

Buying interest emerged, 61.05s, in Wednesday’s auction, driving price higher through the EIA release (+5.4 mil vs. -800k exp). Rotation higher developed to 62.56s into early Thursday’s auction. Buy-side continuation developed through key resistance, achieving a stopping point, 63.48s, as June-July contract roll completed. Minor pullback developed early in Friday’s trade to 62.96s, where buy excess formed before price discovery higher continued to 63.82s ahead of Friday’s close, settling at 62.92s.

WTI Weekly 17May19 NinjaTrader

This week’s primary expectation was for sell-side activity. This probability path did not play out as retracement to last week’s key demand area met with buying interest and subsequent price discovery higher. This week’s rotation traded slightly below the average weekly range expectancy (340 ticks).

Looking ahead, this week’s buy-side breakout above key structural resistance, 62.11s-62.34s, indicates a potential end of the corrective phase begun mid-April. Focus into next week on response to this week’s buyside breakout area/key demand, 63.35s-62.60s, for confirmation/negation of the breakout. Sell-side failure to drive price lower from this key demand will target key supply overhead, 65.50s-66.50s/67.25s-68s, respectively. Alternatively, buy-side failure to drive price higher from this demand will target key demand clusters below, 60.75s-60.35/59s-58.20s, respectively. Given this week’s breakout above near-term structural resistance, the primary expectation, near-term (2-4 weeks), based on market structure is buy-side.

It is worth noting that despite the approximately 57% price rally from December lows, market posture warranted caution on the buy-side near the recent high, 66.60s, as a likely stopping point high developed. Interestingly, MM Long posture has since peaked amidst continued relative concentration of long posture amidst the MM participants (MM Long: Short Ratio= 8:1). Notably, MM short posture has begun trending higher from levels that typically result in the development of structural high formations. WTI declined approximately 9.85% from 66.60s before developing a corrective low at 60s. Based on the market generated data, MM posture remains elevated on the buy-side.

WTI COT Weekly 17May19 Sharedata Futures, Inc.

Also noted recently, the MM net long length in gasoline reached bullish extreme posture. When looking at WTI, RBOB, and HO in collectively, it was apparent that buy-side herding was developing in both WTI and a key refined product, gasoline, warranting caution on the buy-side near the highs. While media punditry banged the drum recently about $100 oil and $3 gasoline, the market generated data told a different story.

NYMEX COT Weekly 17May19

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.