Hi,
I'm new to this thread and I've just read all 1034 posts. Time for a nap now.
But before I go, I have a question that has been on my mind for a long time and I haven't been able to find a satisfactory answer. I'm not sure a satisfactory answer will help anyone's trading, but until I get an answer, I won't really know.
The question is this: What is the EXACT, SPECIFIC process by which the opening morning price is determined on a NASDAQ stock that gaps significantly up or down?
As an example, on Friday, SMOD blew up: closed 21 5/8 on Thursday, opened Friday AM at 14 5/8. Now, in the first 5 minutes of trading, 708,000 shares went through between 14 1/2 and 14 7/8. What does that trading represent? Are those all the trades that came in during the night and morning before the open? How is it determined that this is the range those shares should trade in? How do the MM's communicate that range to each other? At what point does the "backlog" of overnight orders switch over to current orders? Is there some way to tell?
After the initial 708,000 shares in the first 5 minutes, the volume dropped off, lower and lower in each successive 5 minute period. At 10:00 though, the first increase in volume took place, apparently with significant selling, further dropping the price from @14 1/8 to $13 1/8. Once this final burst of selling took place, buyers started coming into the market and ran the stock back up to 14 1/4 by 11:40.
So, now that I've asked them, I see that I have more than a single question. I also see that it could indeed have some important implications for daytrading.
Any input will be greatly appreciated.
Regards,
Mark |
