ΔOI – ESCORTS Ltd-Case study 1

We are very happy to announce the launch of our platform today and there have been technical glitches on the first day which was expected by us and we have this initial period to fix anything that comes in our way and we will stabilize the platform in all aspects within a few days.

But this shouldn’t stop our learning process on how we can best utilize the features and here’s the first post on the series of posts we have planned to write to better explain what Δ OI can mean to you and here is our first example.

Our first example is ESCORTS Ltd. January futures, see below for the candlestick chart on a 10 min interval (full day chart), we also included an hourly chart to put up an additional point and Δ OI data from 12:30 PM, we don’t have the data for the morning because of the glitch but we tried to explain the available data so that we learn something if not for nothing just for today.

Candlestick chart reading:

Here are the candlestick charts and a narration on how an average technical analyst would look at them

This is a 10 minute chart of Escorts January futures and the time in the box highlighted is from 12:30-14:00 and if you see price has been strengthening withing 614-620 zone on a 10 minute interval during this period
This is the hourly charts of escorts January futures and the zone of 614-620 seems to be a support on hourly chart and there’s a green candle on hourly indicating that there’s demand at this support.

Also the open interest line at the bottom wouldn’t have given you much clues or perspective as it’s not telling you at which price the addition is happening and also whether it’s LONG or SHORT?

Use of Δ OI in the scenario:

Now that from the above charts you know from above charts that there has been some strength in price coming but you might be wondering or waiting for a confirmation of one more candle to go long.But see in the data below to understand what was happening at these prices zone which was a previous support.

If you see the OI additions after that start of pullback which started at 12:00, there’s heavy addition of shorts on the price rises as can be seen from this image and there is no short covering pressure suggesting that there is no fear among the shorts yet and someone is using these rises to add short positions

Also you can see the average entry price of these shorts which got added giving you an opportunity to enter at an advantageous price to short.
If you see what happened post 14:00 it’s a good fall from those levels from where shorts have been added i.e. 617.5-618.5 avg until 606 which is almost a 2% fall.

So this is how you should start looking at this data in a meaningful way as an aid to your current understanding of the market and you will surely start making better sense of the market activity very soon and your entries and exits would improve.

This would have been a better explanation if we had the full day’s data, but wait this is just the starting point and there’s much more to come.

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