12.03 WTI breakout?
Big volume on an expanded range
I collect various statistics on intraday/daily/weekly/monthly trading statistics, and today was one of those days that sparks my interest.
After spending much of fall trending downward, WTI appears to have found a temporary bottom in the $92 range and found a major bid today. Rumors of a decrease in crude inventory at Cushing circulated around yesterday and today, but we’ll know for sure on the EIA report on Wed. Whatever the reason, this activity broke above previous resistance with force today.
The chart above displays the daily candlestick prices of WTI from the pit session (800am — 130pm cst) and various metrics: range, volume, avg range/volume and relative range/volume. The “average” statistics calculates the 22-day average of its respective metric. The “relative range” stat will compare each day’s information to a rolling 22-day period for that metric.
Over the past 22 days, the average intraday range was 133 ticks from Hi-Lo on an average volume of 129k contracts traded each day. Today’s activity was very heavy, with a range of 252 ticks on 168k contracts. That is roughly 205% the average 22-day range and 145% the average volume.
The chart above shows a 30 day/4 hour increment of WTI. You’ll notice horizontal lines with highlighted numbers on the right. These are my immediate resistance areas for the near term rally, and today’s heavy activity shows a clean break above initial resitance near $95.60s. The next areas of note are $97.10 and $98.60s. If follow through continues, I’d look to there for my upside targets.
Now, what can we reasonably infer from today’s activity? Looking at the past two years of data (1/1/2012 to 12/3/2013), I ran a study of an upside break on at least 200% the average range and > 100% the average volume.
The study will buy the market close at 1:30pm and exit ‘V#1' days later. Sorting through the results, 12 and 14 day periods look the best.
Let’s look at the 12 day hold. Over a 2 year period, only 4 signals occurred with 50% profitability at the end of the 12th day. The max gain on these signals was 5.47%, while the max drawdown is -3.3%. On average, this signal can produce 0.92% of upside for the subsequent days. The median gain is 1.085%.
So, using today’s close of $96.04, it’s reasonable to consider a move toward $97.81, which is near the midpoint of my $97.10 and $98.60 targets. I’d look for more upside.
