Socket's shares are too low for what they have to offer,
here is an interesting article on Price manipulation
on the OTC and may shed some light on Sockets share price
patterns and why we may be in a walk down now....the sooner we move on to the big board the better
ed
By Giando Argentina
Published by OTCNN.com
06/19/2000 08:58 AM CST
The improved availability and affordability of quotation systems providing ?Level 2? access has allowed traders and investors to make increasing use of this valuable feature when trading NASDAQ and OTCBB securities. Many traders find the extra detail provided by Level 2 systems an invaluable resource in their drive to maximize profits and limit losses. Level 2 is now considered a must for serious traders looking to profit from short-term price movements.
The advantage of Level 2 is that it shows the trader not only what the best bid and ask (Level 1) but also provides additional information about the depth of the market for a particular security. In other words, Level 2 shows the position of all the MMs (Market Makers).
Level 2 usually displays the bid side market makers on the left side, with their bid size, the time the quotation was entered, the quotation itself, and the AXE, which shows how many times the market maker was on the best bid. The same is true on the ask side. Additionally, Level 2 systems usually have a Time and Sales window that shows individual trades in near real time with the size of the trade and the price the trade was executed at.
The basic way to interpret this information is to see which side has more MMs lined up, the bid side or the ask side, and also to see whether trades are going through on the bid (a sell) or the ask (a buy).
When Level 2 shows a large number of MMs stacked on the bid side and lesser number stacked on the ask side with the majority of trades being executed at the ask the normal inclination is to believe the ask or bid will uptick. The problem with Level 2 is that as more and more traders use it to assist them in determining their entry and exit points, the MMs also use it to trap more and more traders. As a trader in the OTCBB market, I have witnessed these tactics on a daily basis.
A common practice is to manipulate the bid and ask to simulate a picture of a stock in an upward trend. Lets say stock XYZ is trading at .50x.51 (bid x ask) and news is just released about the company receiving a considerable contract that will increase their earnings substantially. The MMs see a large amount of buy orders coming in at the ask, so they fill a few orders at .51 and move the ask up. They keep moving up the ask and bid, only filling some of the orders along the way, until they reach a top they (the MMs) are comfortable with. Once this point is reached they set up Level 2 to look very enticing to traders, usually stacking the bid side and at this point, they fill all the orders they can.
The "walk down" now begins, with all the orders filled and no more buying coming in, the MMs drop the bid and ask. Traders now begin to sell, but very few actually get fills on their order. The bid keeps downticking, again with very few orders getting filled until they reach a predetermined bottom, when all the sell orders get filled and the MMs are stacked on the ask.
Traders often wonder how a few sells can drop the price so much but at the bottom they can absorb so many sells and not move the bid. Now they start the cycle all over again. The MMs always buy low and sell high, and a stock will always pull back so they can buy back the shares they shorted, keep in mind the laws of supply and demand don?t always apply in the OTCBB world.
Market makers will also manipulate the Time and Sales window by masking buys and sells. They achieve this by showing buys at the bid as sells, this hopefully will induce more selling or showing sells at the ask as buys, this hopefully will induce more buying before the price drops. I have witnessed this often as I buy or sell a stock.
The important thing to remember is that Level 2 is a great tool, indispensable for a short term trader, but Level 2 only shows the information that the market makers want you to see. As long as the MMs are allowed to manipulate the OTCBB keep in mind, they can also manipulate Level 2.
Giando Argentina is an experienced trader focusing on the OTCBB market. |
