Other possible causes of today's drop:
Oilbabe & Dalin, you both mentioned I posted this too soon today:
With NITE only down a half dollar today, one could conclude that NITE shareholders are no longer flinching when ECN news comes out
But I'm still NOT convinced that NITE's sharp drop at 3:00 p.m. today had any relation to the fact that CNBC took a stake in an ECN. After all, NITE had virtually all day to react to that news and it seemed to be holding for most of the day.
I maintain that most NITE holders are no longer freaked out by ECN's, unless, of course, CSFB comes out with a report that says ECN's are taking a substantial chunk of NITE's market share away from them (which isn't true).
Rather, there could be other possible explanations for today's drop:
1. The low $30's region may have been rich in stop-loss orders. At times, when MM's think a stock is going to go up (e.g. Knight-Trimark presents at Merrill today Wednesday and something might be announced), they'll race each other down the limit order book to scoop up stop-loss shares. Since $30+ has been a good support level in recent weeks, it is logical that day traders and investors might have nudged their stop loss orders in at this level.
2. Options expiration: Market makers often try to unwind their options positions before expiration, for example, by buying back calls they've written, so they don't have to carry their hedge into expiration. If they let the share price drop, or short, the value of calls they've written drops substantially so they can buy back at a discount.
3. Is it possible that the street get word of one of NITE's original OLB investors selling a chunk of shares today? And then panic begets panic.... Hard to tell, but selling of NITE by the OLB investors is to be expected.
4. Merrill interested in buying NITE, so it wants to see a low share price. (This is probably a stretch, but is plausible).
Today's drop was just too bizarre to not have an explanation. Just by the action, we know something is up.
And, Gary, I took a look at comparison charts of SCH & NITE. It is true that both NITE and SCH shared price declines in the last hour, but the volume associated with SCH's decline was not out of the ordinary, whereas NITE's last hour's volume was unusually high. Furthermore, SCH fell from $37 1/4 to $36 1/4 during that time, whereas NITE fell from $33 5/8 to $30 1/2 to close at $31 9/16.
Therefore, I would NOT conclude there was strong correlation between NITE's behavoir and SCH's. Rather, it seems to be NITE-specific. |
