WTI Weekly: Sell-Side Continuation To 56.33s

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

Balance development early week within last week’s lower cluster.

Sell-side breakdown attempt in Thursday’s auction, sell-side continuation to 56.33s.

This week saw balance development through mid-week within last week’s lowest cluster before selling interest drove price lower to 56.33s.

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. This expectation did play out as balance developed early week within last week’s lower cluster. A false breakdown developed to 56.87s in Wednesday’s auction before selling interest ultimately drove price lower to 56.33s in sell-side continuation ahead of Thursday’s close, settling at 56.60s.

WTI Composite 24May19 Sharedata Futures, Inc.

26 – 31May 2019

This week’s auction saw buying interest, 58.37s, in Monday’s auction, as minor price discovery higher developed into Tuesday’s trade, achieving a stopping point high, 59.57s. Sell excess developed there, as buyers trapped, driving price lower to 59.14s into Tuesday’s close.

Price discovery lower developed into early Wednesday’s auction to 57.12s challenging last week’s key support. A sell-side breakdown attempt developed to 56.89s, where buy excess developed, halting the sell-side sequence. Aggressive short covering inventory adjustment developed through Wednesday’s trade to 59.14s. Minor price discovery higher developed early in Thursday’s auction, achieving the weekly stopping point high, 59.20s, probing key resistance. Selling interest emerged during London trade before aggressive price discovery lower developed through the EIA release (+280k v -850k exp). Selling interest emerged, 57s, at key support, driving price lower in sell-side continuation ahead of Thursday’s close, settling at 56.60s.

WTI Weekly 30May19 NinjaTrader

This week’s primary expectation was for sell-side activity. This probability path did play out as key resistance held before selling interest at key support drove price lower to 56.33s. This week’s rotation traded near the average weekly range expectancy (350 ticks).

Looking ahead, this week’s sell-side continuation negated last week’s support. Focus into next week on response to this week’s sell-side breakdown through 57.33s. Buy-side failure to drive price higher from this demand will target key demand clusters below, 55.50s-54.50s/51.80s-51.23s, respectively. Alternatively, sell-side failure to drive price lower from this key demand will target key supply overhead, 58.75s-59.72s/60.50s-61.50s, respectively. Given this week’s sell-side breakdown below key structural support, the primary expectation, near-term (2-4 weeks), based on market structure remains sell-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 peaked in mid-April near price highs. Notably, MM short posture has begun trending higher from levels that typically result in the development of structural high formations. Based on the market generated data, MM posture remains elevated on the buy-side.

WTI COT Weekly 24May19 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. Gasoline has since declined approximately 14% from 2.15, the April high, to 1.84s, this week’s low.

Aggregate COT Weekly 24May19 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.