Stock Attack -- A Complete Analysis Message Board

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Strategies & Market Trends : Stock Attack -- A Complete Analysis

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To: absol who wrote (8476)	5/12/1998 2:07:00 PM
From: Robert Graham	Read Replies (2) of 42787

I determine what are significant large block trades depending on how the stock normally trades. I determine the difference between a sale and purchase driven transaction in a couple different ways. One way is to see a pattern of trading as defined by a spread. This spread is usually on the order of 1/8 or even 1/16 of a point withthe stocks that I follow, sometimes expanding to a full 1/4 of a point. The higher price of this spread is what I determine as the "ask" price. Any transactions at that price would indicate to my buying motivated transaction. The lower value of this spread I see as the "bid" price which would indicate sale driven transactions. There are times it is not easy to determine the current spread in this way. So I look for other evidence. For instance with a NASDAQ stock, after a series of prints at a price, does the price tend to rise or move down. Also what helps is that there will be periods of time where the MM alternates between the prices of the spread to take in stock and then to flip it for sale at the higher ask price. It is patterns like this that makes the identification of the current spread easier. Exchange listed stocks do trade differently and can be more difficult to evaluate in this way. Ultimately what I look for is buying and selling pressure through its effects on the price of the stock. I detect this pressure by seeing if the stock is inclined to increase or decrease in price over a period of time. I also look to see how the stock behaves at inflexion points such as the high and low of the current trading range and the curent high and low for the day. I also look at the stocks response to Selectnet and SOES traffic in the case of NASDAQ stocks and note how much of this type of transaction represents the traffic on the stock. This is where you see periodic groups of back-to-back1000 share blocks for instance. I also see how the stock responds to large block transactions. Keep in mind that there are two types of large block transactions: those that are crossed and those that are worked out in the open market either as a single large block or as a series of smaller large block transaction performed by the NASDAQ MM for their customer which in the end shows up as a large print which represents the total of transactions that were worked by the MM in moving that very large block of stock. I also see how the stock responds to intraday points of support and resistance, and regions of S&R that have been established on the daily charts. This can be even the trendline itself or a key MA. In evaluating the stock's price movement and its response to these inflection points, I look at not only price action but also volume behind the price action.This can help me determine if an intraday trend is weakening and a pullback is becoming imminent. This can also help me identify the significance of supprt or resistance. I also at times find intraday price patterns to be important,such as opening gaps and flag price patterns. At times I have even seen pennants and small ascending and descending triangles. This type of price pattern does not happen as often. There are also rounding tops with their predictable outcome. Also there is the NASDAQ MM tricks to watch out for. One is accumulating stock to send the price of the stock up to sell at a profit instead of flipping for the spread. I have seen MMs move the price up when there was no meaningful trading taking place. This is a head fake design to generate more interest inthe stock from those day traders. Also on the backs of large closed transactions the MM may kite the price of the stock up. The MM can also hold back the price of the stock while accumulating, and even fake the other MMs out doing this. This situation is more difficult to detect. One way would be to probe for this situation by attempt a small sale of stock at the "ask" price and see if it taken in by the MM. If this repeatedly happens, then this is an indication that the price is being held back by the MM. The MM fakes other MMs out under the guise of posting bids through Instinet. This I have validated from a conversation with a NASDAQ MM. The MM can fake the market out and other MMs in order to for example facilitate their accumulation of stock for a large customer of theirs. Records of SEC findings that have validated this type of manipulation by the MM is available on the SEC web site. I hope this helps. Bob Graham

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