sandintoes,
If it happens, it will be first thing in the morning. There's other things which could account for the buying late in the session, e.g. those trading with inside info, real buying pressure from big boys, etc.
But if there's an excessive gap up manipulation followed by an immediate selloff, the way the game works is this. They run the price up into the close to lure in retailers (i.e., the DBH's***). The DBH's** see the run into the close, and jump to the very mistaken impression that the stock will show follow through in the morning with real (i.e., institutional/professional) buying pressure. (Of course, if this in fact materializes, then that is exactly what will happen---good follow through the next day).
Next, they sit back and wait for the retail buy orders to accumulate overnight. Just before the open, they figure out the real buying pressure compared to selling pressure. That imbalance will dictate a gap up if there's more buyers than sellers. But instead of opening the stock at a price that is commensurate with the imbalance, they double or triple that (or something), and open it at a ridiculously inflated price. The DBH** buy orders which have accumulated overnight are filled, and as they are being filled (takes 5 or 10 minutes at most), the MM's and professionals are taking up short positions. The retail buying power dries up, and since the MM's and professionals are on the other side now, buying power dries up.
Next, the MM's and professionals begin suddenly dumping inventory. The buy/sell imbalance has now been suddenly shifted from the buy side to the sell side. The MMs pull down the bid again and again, with the ask following. The DBH's** see this, are horror-striken at the rapidity of the selloff, and frantically sell into that selloff---adding gasoline to the fire and playing right into the trap. The MM's and pros stop dumping as the retail selling pressure gathers momentum (they usually only have to get things going). Finally the last of the DBH's** have sold, the MM's and pros cover their short positions, reverse and take long positions, and run it right back up. At this point, it's not even important how high they run it up, because they already have a profit. In fact, even if the stock just stays at the bottom they will end up with a profit on the day. So typically, the reversal and run-up runs out of steam before it ever gets back up to the opening price (unless big buyers have stepped in to join things), and the participants now sell their long positions.
All in 20 or 30 minutes, max.
Then, they call it a day.
Of course, sometimes this works out exceedingly well, other times it doesn't. Hype from talking heads/news/analysts overnight helps a lot. It can at times be good for tremendous profits in a stock that ends the day flat or even negative.
Nice living, if you can get it....... Now you know why seats on the exchanges are so expensive---and why it's not a good idea to go toe-to-toe with the MM's and pros <ggg>
JMVHO...........
Walkingshadow
**DBH = Designated Bag Holders (i.e., us retailers) |
