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Strategies & Market Trends : DAYTRADING Fundamentals
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To: Rick Faurot who wrote (4220)9/19/1999 3:23:00 PM
From: Rick Faurot  Read Replies (2) of 18137
 
On the question of what kind of indicator a vanishing bid constitutes, I think we need to consider the question of liquidity.

Granted that there are always a few aggressive traders who will quit the bid to chase the offer when they see some sign that the stock may move up. On a highly liquid stock, these aggressive traders will normally be replaced by a larger number of traders whose response to a rallying market is to join the bid.

On a thinly traded stock, if a few aggressive bidders quit the bid to chase the offer, no doubt the bid will thin or even downtick if no one steps in to take their place. Whether this means the stock is about to move up or not is, IMO, best judged by flipping a coin. A stock with a one point spread and a 200 share inside bid is not something I want to watch for more than few seconds. To those who trade such stocks successfully, I congratulate you on your psychic, er "counterintuitive" abilities. <<gg>>

Rick
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