Trading Analysis - 29th Oct 2018

Alfacomp

29 October 2018

End of Day



To understand today I believe that we need to understand last Friday's trading. Recall how it seemed that there were two different interpretational scenarios to explain the 10:54:03 trade on Friday - I favoured the Buy interpretation, but the thorn in the side of this was that this left the end day trading position for the Market Makers at around +1.4M more Buys than Sells, which would usually be highly unlikely. 

Today we were informed about a 500K trade at 28.25p at just after 2pm on Friday - this is just below the accumulation-distribution line for that time so would appear to be a Sell (i.e. shares being transferred from PI's to MM's) - this then knocks the Friday end of day trading position back to only around 900K more Buys than Sells.

In this context the arrival of a very late reported trade of 750K at 9:06 this morning starts to make sense as a Sell from First Island to neutralise the 900K excess of Buys that we had on Friday. This trade is the leftmost highlighted one in the chart above and is a simple single trade.

Following on from this we have a serious of duplicated pair trades, all at 27.875p - 350K at 9:08:35, 250K at 10:32:30 and 200K at 12:43:56 - I count one of each pair as a Sell from First Island and the second part of each pair as an Inter-MM transfer. When you take into account the 750K that occurred before all these (i.e. imagine it had not been applied) you can see that these Sells are precisely what would be needed to keep the accumulated nett trades position close to the zero-line during the day - what that means is that they are needed to offset the significant amount of Buying that is occurring and that it doesn't look like there are further big Buys yet to be revealed.

The rightmost highlighted trade is a triplet structure - 250K at 28.10p at 13:17:35 following by a duplicate pair of 250K's two and half minutes later at 28.00p. I have ascribed this to a Sell by First Island of 250K followed by a couple of Inter-MM transfers thereafter.

The end day trade position ends at -719K - i.e. pretty close to neutrality if the early 750K had not been dropped into todays trading. 

 


The average price for Sells today was 27.97p - the chart above shows the LSE reported end of day closing price of 28.00p which is somewhat misleading as it only arose due to an end-day auction UT of 1,100 shares - the real mid-price is around 28.25p today. However on this occasion it usefully illustrates the close to 28.00p price that Market Makers are having to pay for the shares that they previously sold for 28.30p.

At these prices it makes some sense for them to start closing their short position - they have now used the First Island share sale to be able to walk the SP back to the point that they can make money on their short position - precisely as they had assumed on the 17th of October.


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