For anyone interested in F5: This is one of the greatest posts I have ever read courtesy of J. M. Burr & should explain today's unusual close.
To: speedbot (165 )
From: J. M. Burr Friday, Jul 16 1999 4:56PM ET
Reply # of 172
There is an aspect of trading that is not well understood. If traders don't have a significant pile to trade, the situation can get out of hand when demand is excessive. So how do you handle the situation? Demand is high, you are under pressure to move a stock, so why don't stocks make incredible gains within hours? The answer is that traders respond to scarcity/demand by moving hundreds of shares back and forth between themselves at constantly reduced prices to "shake" free shares from frightened holders who are determined to retain their profits. Using this procedure it is possible that in a single day a million shares of a popular stock can be traded with very little upward movement, and at the end of the day (or, really at any time) they can move 20,000 shares and, mirabile dictu, the stock ends the day at a loss. Analyze what happened today; first the float is minimal; secondly, the market makers are unhappy when the float is squeezed. The move to 80+ was no accident, because lots of wise-guys are aware of this product. They were ahead of the market, probably by two to three days, but that fact is unimportant if you are holding for the long run. Now, the MMs are not driven by either long term or short term profits when a stock is being traded in the millions of shares. The price is important but not crucial (unless a stock is going bananas or is taking a dive), because it is too hard to calculate institutional profits from minute to minute and hour to hour, what is really important is volume. Up or down doesn't mean that much unless you have a Black Friday. Billion share days are heaven and everyone makes money. However, if volume dries up on any given stock, the supervisors are kicking MM ass; in sum, they are out of business and it is time to manipulate. Now, suppose there are a thousand guys like me, or a few major institutions, who really believe that FFIV is the reincarnation of... fill in the blank. Very shortly the MMs are not going to have stock to trade. Get the picture? Sure, we will always be taking profits, but no-one dumps entirely a great company. As a student of the psychology of the market, I feel there is nowhere for FFIV to go but up. If I'm wrong, I'm sure I'll hear from all of you.
I agree 100%. The monitor was definitely flashing rogue sellers. With 1,833,500 million shares today FFIV has virtually no existing float. The mm were desperate & had to resort to some seriously underhanded tactics at the close.
s :) |
