Trading Analysis - 5th Nov 2018

Alfacomp

5 November 2018

10:20AM 


Again the usual kind of pattern - a very quick spike up (by 3.6%) followed by a shallower walk down (this time only to +2%) courtesy of a couple of early 150K sells followed by another 250K Sell, all before 8:30am. None of these appear to be duplicates or parts of a larger pattern, yet.

There then follows the usual series of narrowing spreads as the nett excess of Buys continues to grow - eventually they may have to chuck another sell into the market to give themselves the shares they need. The buying seems pretty persistent so it would be a brave MM who would go short, assuming they could pick up shares cheaper in the afternoon. It would be a crazy MM who would go short for any longer, as news could come any day now.

3:00PM 


An additional (single) 250K Sell at 9.15 kept the Nett trading position under control for a short while but it appears not for more than a couple of hours - at which point the nett excess of Buys appeared to reach a total of more than 600K. The apparent drop around noon and the incredible tightening of the spread (some platforms were at some points quoting Buy prices below Sell prices) only lasted until about 1pm and then the SP continued its upwards trajectory.

We may expect to see a delayed Sell around noon, however they don't always show up to make the apparent movement of the Buy/Sell prices logical in any local sense.

End of Day 


A significant number of delayed trades reported at the end of the day, and large ones too - how does this affect things ?

The short answer is significantly.

Up to 10am the trading is roughly in equilibrium - the nett trade position hovers around zero because there are a series of significant Sells (the ones highlighted) - 150K, 150K, 250K, 250K - just enough to knock the nett trading position back to zero.

The price to buy shares reduces continuously towards 11:45am. Then there is an interesting clutch of trades all at precisely 11:52:48. The first we see of these is as a pair of trades for 250K and for -250K both at 38.25p, reported some 2 hours later, at just before 2pm:


They appear to cancel each other out and have no effect. However at the end of the day we get the trade restated as a single trade of 500K at the even higher price of 38.375p:


This combination is the pair of circular markers sitting above the advertised Ask line just before noon - clearly this is Buy territory. The nett trade position appears to approach 1Million, and yet the price paid for shares reduces. This seems highly counterintuitive so perhaps the old in-out-shake-it-all-about was one market maker trying to fool us, or all the others, into selling some cheap shares.

They try for an hour to pick up some shares from sellers but get nowhere and just after 1pm have to start putting the price up again so that they can score another 300K of shares at 38.05p at around a quarter past one. Still they cannot make any real headway on the c. 700K shares needed for the day so they have no option but the put the price up again - just after 2 oclock they manage to get themselves a block of 1M closely followed by another 250K, phew !

However the buying continues and again the nett trade position approaches zero. Remember they may well be still carrying a short position of a few million from the previous couple of weeks trading - recall that there has been nothing reported yet that further explains the 15M trade of last week or provides any evidence to suggest that a large block of First Island shares were taken cheaply to close that short position. Perhaps First Island just read our article and decided to hang in for the longer game - if so then well done to them !

Thus we have to consider the possibility that a Market Maker (perhaps only one) still has a short position open and that they are the ones who would dearly love to find a source of shares to be able to close that position with. It seems that at lower SP levels there was insufficient selling available and Buys were still able to outnumber Sells. Today may the first time in a long while that the MMs have managed to get more shares back from PI's than have been sold to them - however it took prices of 38p to achieve this, and there may well be still a good few million of the short left to close on.

They got 3.1M shares today at 38.0 - 38.5p. Tomorrow they may have to pay 39p minimum.

 

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