Level Two question - what does this action mean?

Discussion in 'Order Execution' started by SwingOutOn5, Jan 4, 2006.

  1. Sometimes I see this action on level II:

    ask's are filled and bids are stepped up, then the price on the ask and bid drops $.04 or so for no apparent reason - WTF?

    for example

    b a
    .88 .89
    .88 .90
    .88 .91
    .87 .92

    green orders go through on the tape (assuming all the sizes above are the same). Then an immediate change to

    b a
    .82 .83
    .81 .83
    .80 .83


    what the hizzy is going on?
  2. alanm


    You have 100K to sell. You've been sitting quietly on the offer with an iceberg displaying 500, getting the occasional fill, and someone starts taking you and everyone else, and you see 50K total show up at the bid and the next few cents down. You want to sell, and size has shown up, so you hit it while you can (and before someone else does).
  3. so would this be a longer term bearish signal? I saw it about 40 times Wednesday on aapl
  4. alanm


    Beats me. It depends on whether the buyers or the sellers get exhausted first. If it's just the one seller that's been holding it down, and he gets done by whacking the bid down, you'd expect it to be bullish. If, OTOH, it brings other sellers out of the woodwork and/or triggers sell stops, it might exhaust all the buyers and prices will fall.
  5. are there any good resources on learning to read level 2?