Oscar:
Sorry for the delay in responding to your question regarding yesterday's drop on a very high volume.
I was talking to a friend of mine who worked on the NYSE Trading Floor to get his opinion on such a move. His response was as follows:
"When there is a large-size order on the buy side (especially if that buyer is a good client of the company clearing the purchase), the MM would normally attempt to take the price of the stock down drastically in the absence of other good-size orders on the buy side. By doing so, he will try to pressure the weak hands to panic and sell and possible trigger some sell-stops as well, thus accumulating as many shares at the lower prices to satisfy the large-size buy order (remember that the MM is the only one who has the information on the buy/sell-stops as well as all limit orders).
Another scenario that has been witnessed rather lately which involves more risk on the buyer's side is by manipulation, i.e. if a buyer wants to buy (let's say 200K shares of a stock) without moving the price much higher until his order is filled, will try to sell short several increments of 5K during the last hour of trading in order to create some selling pressure towards the closing and possibly trigger some sell-stops as well as liquidation by the day-traders, until the stock reaches his price, at which time, he will step in to buy larger blocks (partialy to close his short position at a slight profit), and establish a long position."
Mind you that both scenarios are very tricky and could be very costly if they are not executed properly. Having said that, I personally believe that this is exactly what happened yesterday towards the closing. Apparently, a large buyer came in by mid-day yesterday and started accumulating SEPR around the $43 price range until the price began to recover very rapidly to reach almost $47 3/8, at which time, that buyer slowed his buying down until the final closing minute when he came in with 2x100K shares buy orders right at the close."
I have also been noticing recently that more buyers in SEPR are stepping in once again on the buy side by placing their large-size orders right at the closing so that they do not attract too much attention and move the price too much.
Anyway, today's action was rather impressive on good volume, although I would have liked to see SEPR close above the 50-DMA at ~$51-52. If you look at the daily chart of today's action, we traded lower right at the opening to test the 200-DMA once again at around the $43-44 area, and held up very well (yesterday we traded as low as $42 1/4). It might be a little premature for me to call this a double-bottom testing of the 200-DMA, but I was willing to take my chances to step in today and add to my position around the $46 area.
I hope the bears are sawing their fur coats very well because I am going to send them to the North Pole very soon for a long long long hypernation COMA. GOOD LUCK TO ALL.
Mazen |
