Bruce, I know that people are getting tired of the "taking out" of the stop loss story, but since you just asked,
"Like I said I was traveling and I may have my figures mixed up. Do I?",
Yes, Bruce, the story is still not right. I'm afraid there does not appear to be a shred of truth in it. It did not happen, and I'll prove it.
First, here's a short summary of your comments on this story:
On July 15th, you wrote:
"Today Grant told me that there was a stop loss at $2.00 and the brokers dipped it down to take it out."
Message 5210057
The next day, you clarified:
I'm sorry I said "brokers" but I meant "traders"[...]
Grant told me the stop loss was for 60,000sh. I didn't
ask his source
Message 5214706
On July 17:
"How this all transpired I don't know, but there was a stop loss order @ C$2.00 for 60,000 sh. The stock opened down and triggered the order. I hope this explains things. If not I'll keep trying."
Message 5233466
And just now:
"With regards to WT being dipped by the traders I don't know. All I have info on is that a stop loss for C$2.00 of 60,000 sh was executed on a day that trading in the stock was gap down. I didn't follow WT during that particular day because I was traveling. I believe that WT had closed the day before at C$2.10 and the high the next day was C$2.00. Weather traders dipped the stock or pre-market orders gapped WT down I don't know."
Bruce, the reason I jumped on this story is because, to anyone familiar with the workings of the TSE, it lacked face credibility. Information about limit orders is very hard to obtain, just as with timely information about shorts outstanding (another thing Grant's was reported to be telling people). Just as in the previous story (about short selling) which I debunked, I found it difficult to believe that Grant's office had access to information central to the story. That was the red light.
But a suspicion does not proof make, so I had to find the holes.
First, I explained that a specialist (aka market maker or trader) cannot bid a stock down on the TSE. You conceded that that might not have happened, but stuck with the fact that a stop loss order for 60,000 sh. had been triggered near the start of the day, when the stock traded at $2.
But even that watered-down version did not occur.
No stop loss for 60,000 shares was triggered on that day.
A stop loss is a single order placed with a single broker to be executed if the stock falls and trades at a certain price. The block of shares would then be immediately sold at the market (in other words, to whatever are the highest current offers). If the block is large enough, especially with an illiquid stock, the execution of the stop loss will often drive the price down far below its trigger point (which was, in this case, claimed to be $2). I agree with your earlier point, Bruce, that these orders can backfire on the investor trying to use them.
Is that what happened with WT when the shares tanked on July 15?
If the story is true, we should see a single broker selling 60,000 shares in succession at descending prices (as the sale feeds into successively lower offers). It is easy enough to check WT's trading record for that day. When we do so, we see no such selling!!
On July 15, only two firms, McDermid and Yorkton, sold 60,000 or more shares in total. Selling for both was spread throughout the day. Neither dropped a block of 60,000 shares. The closest was McDermid selling around 30,000 in an orderly fashion in mid morning. That transaction had little immediate effect on the market. McDermid's trading activity was not unique to that day. The next day, it was also the largest seller. (See my next post for that day's trades.)
The much discussed, mythical stop loss never existed!
How's that for a waste of your time and mine? Who do we have to thank for that?
So Bruce, I ask you again, will you denounce this story?
Skepticism may not be pleasant but it is often warranted.
Mike
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