The Oil Reserves and "Delta"

The folks over at MarketDelta refer to the net order flow Ask volume minus Bid volume as "Delta." We've discussed this concept a few times on this blog, and shown off some of the unique volume tools that MarketDelta provides for studying "Delta." Some of the biggest news in the last week has been about the price of oil and the release of oil reserves which should, ultimately, reduce prices in oil. And initially, there was indeed a strong reaction as prices fell sharply. But only a week later, prices are back up. Who knew?

The answer: traders who study order flow.

Take a look at this very interesting chart that shows the progression of order flow as oil traded since the news announcement. It is quite clear that the actual volume entering the market was not matching the price action. The bottom indicator is another example of the "Delta Momentum" tool we showcased earlier. The middle section on the chart is just the basic Volume Breakdown indicator that MarketDelta provides to study per-bar Delta.

Oil futures contract, CLQ1, for June 2011


Simple Range Bar Order Flow

Rotations and the Delta Pullback