medium · Order Flow Analysis absorption-exhaustion-imbalance
In the Crude Oil (CL) market, the 72.50 level shows four consecutive bars where bid/ask volumes are consistently $450/430 (average is $100/100), while price remains within a 3-tick range. The fifth bar suddenly moves to $72.58 with ask volume counts of $380, 450, 520.
How should a trader respond?
- Sell at $72.58 as this is a 'probe and fail' stop run into the heavy supply previously seen at $72.50.
- Buy at $72.55 with a stop at $72.48, anticipating a genuine breakout from an institutional absorption zone.
- Avoid the trade because the Δ at $72.50 was slightly negative, indicating that sellers are still in control.
- Wait for a return to $72.40 to buy at a deeper discount, as absorption zones usually require a 'shakeout' before the real move.
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