Gaps on NYSE stocks

Discussion in 'Trading' started by janko, Oct 24, 2001.

  1. janko


    Ok this might be a dumb question but i'll fire away anyways>
    is it more likely for NYSE stocks to go back and fill the a gap (ex: LXK) than lets say nasdaq stocks. My reasoning is that it is one specialist and its coming out of his inventory so i would imagine that he would want to get his inventory back in balance a lot sooner than several brokerage houses like meryl or goldman etc..
    Am I looking at this right or is this a dumb question like i said? Any thoughts - education - thnx guys
  2. SGD


    To use your LXK example:

    Even if the NY specialist (in LXK), wanted LXK to fill the gap, he couldn't have control over that. If outside selling pressure is too great, it won't happen. If the aggressive selling pressure is there
    all of his bids will be met.

    If LXK rallies back to 50, it won't be because the NY specialist wanted it to.
  3. I'm getting more and more interested in NYSE as I read posts here. I hadnt thought much about it before but it looks to me like there are some definite advantages in dealing with one person rather than a crowd. I think some of what Praetorian2 and Lonehand are doing is very interesting. You might want to check into their Yahoo site. Whenever a listed stock makes a big move it would seem to me that the specialist is in an awkward position.
  4. SGD


    Whenever a stock make a big move, the specialist has a situation where he can benefit. The stock will usually have above average volume, so he will earn more $$. And the specialist will usually benefit from any gap in the stock. If the gap is on the opening or during the day, he can benefit and take advantage of the gap.

    There are many plays that a trader can take advantage of from gap openings and gaps during the day. Those are great times to open or close positions, depending on the circumstances.
  5. I've also become more interested in NYSE stocks partially by being on yahoo w/ P2, lonehand, lescor and about 8 other guys...its good to have those guys around...i probably make the most useless noise, but i have't gotten yelled at yet
    but seriously, the chat is cool, much better than the hype at other boards..
    Those guys are serious about makin $, no dumb stuff, until the spammers come anyone who's serious about it, I'm sure you'd be welcome
  6. SGD

    I've never traded anything but Nasdaq so I'm not real familiar with specialist operations but if there was a big run on a stock and it lost say 30% in one day, the specialist would have to buy all that stock, wouldn't he? So he would be holding a huge amount of stock worth less than he paid for it. Wouldn't he do everything in his power to drive the price back up. The reverse being true of a big run up. This being the case it seems you might be able to take advantage of this in some manner.
  7. SGD


    The specialist must maintain an orderly market. Want to know when he will by the stock. When the stock runs down, then someone unloads a large amount of shares because they have to sell, then the specialist will gap it down 1/2 of point (just above some big bids and/or support). There will temporarily be a lack of selling pressure(because the sellers are exhausted, and the stock will rally. Maybe it will rally .10 or $2.00.

    That is when the specialist will support the stock. If the futures are coming in and there is a tremendous amount of selling pressure, if the specialist believes that the stock is going lower, he will not be supporting the stock. He will try to have an orderly market, but he will not buy just for the sake of supporting the stock. When the futures lose their downward momentum, and the sellers are getting dried out, then he will be a buyer to support the stock, then as the stock snaps back, he will be selling to the short covers and the new longs. (that where he will be providing liquidity).

    As a trader, watch for those opportunities. After a while, you will be able to spot them and take advantage.
  8. LoneHand


    NYSE Gaps, interesting thread.

    Here is what I think:

    Stock has bad news (Miss the earnings, warned for next year, CEO hit by a bus... whatever the news is, is irrelevant here), here is the specialist will do in the morning (assume he's flat last close-why wouldn't he?):

    1st, he sees selling orders pile up on his desk before the open (hedge fund shorting, panic fund selling etc, Ron from CNBC interviewed a specialist, and thats what he said), he will gap down to the level that he think is safe to buy (overshooting), the shorters from last night will cover at this point (no one can resist the instant profit overnight), then you see stock trying to close its gap.

    2nd, the specialist has no interests in the stock, the only reason he buy at the open is to provide a market(orderly? don't know) and sell on the way up when shorters cover their shorts at the open hour.

    3rd, once the shorters are done covering, the stock will go down again (those who longed at the open with the specialist taking their profits and creat the 2nd wave of panic selling), and the specialist are right in the short position (he sold on the way up), this is his game plan.

    Now is the tough part:

    Recently I noticed that, the fund don't sell at the very open, but sell the 1st bounce up, the specialist will be caught by this, so he has to drop the bid fast to protect himself, so for a gap-down, I start to short first if I can get in (shorted ene yesterday, took some profit), then I watch for a bottom to go long.

    Note: Does this always work? hell no, nothing does in the market, gap downs are different, when it gap-down hard (>20%), short it first has a better chance, small gap downs are fadable (go long with the specialist at the open). On the other side, shorting the gap-ups seems to have better chance.

    Last, NYSE vs. NAS:

    No pre-market or ECNs on listed, but tons of shares to borrow...

    Getting a fill is harder and slower and the spread is wider...

    Less partial fills on listed, good for the size trade...

    Good luck
  9. ddefina


    From the posts here, it would seem that the specialist uses market forces (large bids say) to be his backdrop where he'll become a buyer. How is that any different than the Nasdaq ebbing and flowing to concentrations of buyers and sellers? I've always wondered if the specialist method is superior to market makers on the Nasdaq (like some seem to think). If the specialist doesn't provide his own support to the market until market forces "back him up," what value does he add to the equation?

    I personally wish the NYSE would become another freemarket type exchange like the Nasdaq and eliminate that guy who won't fill my limit orders.
  10. Nic

    I trade 99% NYSE. I'm doing something different now as I've learned a better system. But my old system was VERY
    similar to Pretorian2 and Tony OZ's overbought/oversold systems. I'd pick tops and bottoms for stocks.

    If a stock had gone down 14 days in a row with volatility. I'm very sure that the guy who can control the stock in low volume has a huge long position. He's going to gun that stock the second the volume dies down to get some shorts to cover and be able to dump his long position.

    IF a stock has risen for 10 days in a row with huge spikes in volatility that there is a high probability that the specialist had to be the seller. When the buying dries up he will try to get some longs to take profits and hit stops.

    On NASDAQ the market makers are required to post a bid /ask but they only have to do 100 lots (as you see constantly) and they can make their bid/ask quite wide if they wish. Very few have huge positions in a stock that has run up.

    This was a huge reason for me trading NYSE. I also preferred that I can dump 20,000 shares at the market and be guaranteed a fill .20 away from the market usually. Where as if I tried to do that on NASDAQ all of the market makers will back away or take 100 shares and I could lose 4 points by the time I'm filled.

    On the original message I 've seen gaps fill for NASDAQ/NYSE pretty equally.
    #10     Oct 25, 2001