<its all buys>
I think the assertion comes from the following scenario--Start by assuming:
Everyone who owns a stock is a seller at a potential price (which they set). They can only sell, however if they find buyers. Say a stock is priced at $75. Two scenarios are:
1. The present owner is anxious to sell. At 74.875 there are a number of bids for the stock. The owner puts up his shares at 74.875 (the bid) and his trade is quickly executed. Since the trade is executed at the level at which the "bids" prevail, and are waiting for someone to come to them, this is considered as sell-side transaction.
2. If the owner is not anxious to sell, but is always interested in taking a profit, he might offer his shares at the ask side. Say 75.125. They might sit there for awhile, and then get taken up by someone anxious to get in. The trade is really initiated by the buyer, who has moved out ahead of the other bids to pick up the shares. That is a buy-side trade.
Most of the time, trades are executed on both sides of the bid and ask during the day. Sometimes, the stock will start out at 75.125/74.875 ask and bid, and for a long period "all" the transactions will occur at 75.125. These are "all" buys, even though the stock price isn't moving.
One thing it might be indicative of is a technical resistance level, as all the potential sellers at a level have to be cleared out before the stock can move higher. As more transactions are completed at that level, there will be fewer and fewer left willing to sell at that level. Eventually, if someone wants to buy the stock, he will have to move up higher--say to 75.25. And that is the significance of buy-side transactions.
I'm not taking a position on the analysis to which you are responding. I did not see the numbers he was looking at. There are services out there where you can see how bids and asks are lined up at any given time, and from that determine whether sales are going off at the bid or the ask.
You can kind of get a picture, although not a great one, at this free site, which tracks trades as they occur:
quote.com
And of course, all of this takes place dynamically. Each person is able to change or remove his buy/sell order at any time. So the bid/asks may be constantly changing.
And I don't think the analysis has much to do with the market makers, except as they effect liquidity. If there are no bids they won't buy your stock. |
