XLU Weekly: Sell Response Early Week At Key Supply Before Balance Development

Summary

• Price discovery lower in Monday’s auction to 63.82s where buying interest emerged, halting the sell-side sequence.
• Buy excess developed there in Tuesday’s trade before price discovery higher to 64.38s ahead of the week’s end.
• Bullish breadth stalls following initial decline from all-time highs.
• This week’s auction saw selling interest early week from key supply to 63.74s before buying interest emerged, developing balance into week’s end.

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

As noted in last week’s XLU Weekly, the highest probability path for this week was for price discovery higher, barring failure of 64.06s as support. This week’s primary expectation did not play out as price discovery lower developed early week to 63.74s, testing key support. Buying interest emerged there before price discovery higher developed to 64.38s ahead of Friday’s close, settling at 64.38s.

23-27 December 2019:

This week’s auction saw price discovery lower in Monday’s auction as last week’s late sellers held the auction and key supply, 64.60s-65.12s, held. Price discovery lower developed to 63.82s into Monday’s close. Buying interest emerged, 63.86s-63.98s ahead of Monday’s close. A failed probe of the low formed a buy excess at the weekly stopping point low, 63.74s, driving price higher to 64.11s ahead of Wednesday’s holiday.

Balance development continued in Thursday’s trade as buying interest emerged, 63.93s, ahead of Thursday’s close. Minor price discovery higher continued in Friday’s trade to 64.38s as buying interest emerged, 64.27s-64.37s, into of Friday’s close, settling at 64.38s.

This week’s auction did not see the primary expectation play out as price discovery lower to 63.74s developed, testing the key support area. Within the larger context, this week’s auction saw balance development near major supply, 64.50s-65s.

Looking ahead, the focus into next week centers upon response to the key cluster, 64.10s-64.40s. Sell-side failure at this key cluster would target key supply cluster above, 64.70s-65.12s/new, all-time highs, respectively. Alternatively, buy-side failure within this key cluster would target key demand clusters below, 64s-63.77s/63.20s-62.65s, respectively. From a structural perspective, the highest probability path near-term remains buy-side, barring failure of 63.77s as support. Within this near-term context, the intermediate term (3-6 month) is now at a key juncture and depends on resolution around 64s. This week’s auction may see reduced trade and range amplitude

Analyst’s 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.