CL spike on 5/16 at 23:00:02 Pacific. Insights as to why?
Hi. I finally decided just to post a question, instead of cluttering somebody's journal or thread. On 5/16, at 23:00:02 Pacific, there was a very large spike in CL from 95.31 to 95.79 and back, all within a second; around 1000 contracts total. Can anyone say why this happened and how common it is; should we chalk it to stop hunting? I don't see an economic announcement scheduled for that time, using forexfactory.com's calendar. Thanks in advance.
This post has been selected as an answer to the original posters question
For spikes like this there is always an explanation. In this case it is pretty easy to figure it out.
The spike occured at 23:00:02 Pacific Time. The timestamp and the shape of the spike points to a news release. So what you need to find is the source for the news. Actually, if you do your homework, you should know the release times for all scheduled news that affect the markets.
In this case it was easy to figure out the source of the news. 23:00 Pacific Time is 8:00 Central European Time, and the scheduled news that came up was the release of the passenger car registrations by ACEA (European Association of Car Manufacturers).
For further analysis of the spike, just open a high resolution tick chart. For convenience, I have used a 5-tick chart. The chart shows 1 second in the life of the crude oil futures market (the time interval between 8:00:02 and 8:00:03 CET).
What happened? After the news release, there was a downmove, all 1-lot orders (a volume of 5 on a 5-tick chart identifies a 1-lot order). Selling accelerated and after about 140 contracts had changed hands, prices hit support at $ 95.02. The churn bar shows that the sell market orders were now hitting a larger order sitting in the order book.
The little mice came to the cat who was waiting for its European breakfast. Once the cat had bought 35 contracts at a price between $ 95.03 and $ 95.05, it then established a sell limit order at a level of $ 95.38, just at the upper end of the range, where crude oil was sitting prior to the news release.
The cat(s) probably made a profit of 35 * (95.38 - 95.04) * $ 10 = $ 11,900. The little mice paid dearly.
Conclusion: It is not a good idea to engage in breakout trades via stop market orders after a news release. In this case the traders who had prepared their game with limit orders took away the money from the breakout traders. In the end crude oil traded where it had been trading before. Winners and losers closed out their positions, and the spike just shows the size of the battefield.
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