WTI Weekly: Last Week's Key Support Holds, Rotation Within Last Week's Range

Sep. 01, 2019 7:59 AM ETUSO, OIL-OLD, UWT, UCO, DWT, SCO, BNO, DBO, DTO, USL, OLO-OLD, SZOXF, OLEM, WTIU, OILK, OILX, WTID, USOI, USOU, USOD, NRGD, NRGO, NRGU, NRGZ, OILD-OLD1, OILU-OLD1, USAI, YGRN2 Likes
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Summary

  • Failed breakdown in Monday’s auction through last week’s support; price discovery higher through mid-week to 56.75s.
  • Sell excess in Wednesday’s auction halts buy-side sequence; balance development at key resistance into week’s end.
  • This week’s auction key support held early week before buying interest drove price higher to test near-term key supply.

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 price discovery lower barring sell-side failure at the key demand cluster, 54s-53.24. This expectation did not play out as key demand held in Monday’s auction. Buying interest then drove price higher to 56.89s into key supply overhead, before aggressive selling developed to 54.55s ahead of Friday’s auction, settling at 55.17s.

WTI Composite 23Aug19Sharedata Futures, Inc.

25-30 August 2019

This week’s auction saw a minor probe of key support in Sunday’s Globex auction, achieving the weekly stopping point low, 52.96s. Structural buy excess developed there, halting the sell-side sequence as price traded back above prior key support early in Monday’s trade as the sell-side breakdown failed. Buy-side continuation developed, achieving a stopping point, 55.26s, into Monday’s NY open. Selling interest emerged there, driving price lower to 53.58s into Monday’s NY close. Balance development occurred in Tuesday’s auction, 53.69s-55.07s, as buying interest emerged, 54.90s, into Tuesday’s NY close. Following Tuesday’s NY close, late buyers held the auction as a structural buy-side breakout developed above Monday’s key resistance.

Price discovery higher developed into Wednesday’s early trade, achieving a stopping point, 56.75s, into the EIA release (-10mil vs. -2.1mil expected). Structural sell excess developed near key supply, driving price lower in retracement to 55.43s into Thursday’s London auction. Buying interest emerged there, driving price modestly higher, achieving the weekly stopping point high, 56.89s. Balance trade developed, 56.89s-55.70s, into Friday’s auction before selling interest emerged, driving price aggressively lower to 54.55s ahead of Friday’s close, settling at 55.17s.

WTI Weekly 30Aug19NinjaTrader

This week’s primary expectation was for price discovery lower. This probability path did not play out as key demand held early week, driving price higher to 56.89s, near key supply ahead of week’s end. This week’s rotation (393 ticks) was slightly above the average weekly range expectancy (388 ticks).

Looking ahead, response to this week’s key supply cluster, 56s-56.80s, will be key. Buy-side failure to drive price higher from this key supply will target key demand clusters below, 54.40s-53.40s/53s-52s, respectively. Alternatively, sell-side failure to drive price lower from this key supply cluster will target key supply clusters overhead, 57s-57.50s/58s-58.75s, respectively. The broader contextual question is whether the buy-side phase (June-July 2019) completed at 60.94s or will continue. Near-term bias shifts sell-side, barring failure of 56.89s as resistance.

It is worth noting that market posture warranted caution on the buy-side near the April 2019 high, 66.60s, as Managed Money (MM) Long posture peaked there. Since that high, MM short posture trended higher before reaching the near-term peak into late July where the current price low was formed. This week’s report reflects an increase in MM short posture (57k contracts) as the short posture trend higher has halted. It generally requires a large quantity of MM short posture to form structural lows. Despite that, MM net long posture is now also declining as Open Interest declines, implying a mixed leveraged capital picture. In all, MM posture is neither at bullish or bearish extreme, implying no asymmetric opportunity is currently present.

WTI COT Weekly 30Aug19Sharedata Futures, Inc.

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

This article was written by

Sharedata Futures profile picture
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Historical Data Mining & Visualization for NYMEX energy markets. Our experience derives from the proprietary trading world involved in US Index derivatives, commodity ETF derivatives, and exchange-traded NYMEX WTI derivatives.Futures trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
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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.

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