Oil Order Flow - OFA Script Triggers Bearish Outlook

Hey traders,

One wonders. Is there a case to be made to be short Oil? The OFA is telling us, you bet there is, judging by the realized order flow as depicted by the script.

I won’t defend this point with any subjective opinion.

Instead, I will let you see the Oil chart in this 4h timeframe, with the OFA script attached to it, to show you what’s the current state of affairs.

What do you notice in this chart? 'DIAMONDS' tend to see a failure in amplifying the move in equal or greater magnitude than the preceding cycle.

When that occurs, we want to stay on the lookout as this is by no means a sign that validates aping in, but rather it is an early sign that the tide might be turning.

We then start getting more validation should the structure start shifting by breaking the previously identified low in the OFA script, in this case at $71.00.

If that break materializes with price acceptance beyond, then we know we might be onto something. Well, all the stars are now aligning for further falls in Oil.

Remember the two key main features of the OFA script :

Magnitude: A major clue that will help determine the health of a trend is the type of progress by the dominant side in control of the trend. We need to ask the following question: Are the new legs in the active buy-sell side campaign as identified by the script increasing or decreasing in magnitude?

Velocity: When it comes to the distance the price moves, the magnitude is only ½ the equation. The other ½ has to do with the velocity of the move or the speed. Was the new leg created after a fast and impulsive move? Or did price make a new low or high with the movement being sluggish, compressive and taking too long to form? A good rule of thumb is to count the number of candles it took to achieve a new leg.

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