Question for experience traders

Discussion in 'Options' started by shaqtus, Feb 24, 2009.

  1. shaqtus


    I have been reading this forum for a while and have learned qiute a bit.

    Quick question to old timers (or to people that have seen a lot)

    Take a look at the intraday chart of JPM today (2/24). Especially in the afternoon it really seemed like somebody is trying to hold the price below 20.50. Everytime it touched 20.50 it bounced down. It was fascinating(and frustrating because I am long JPM) for a while it did go over 20.50 only to come back sharply.

    Eventually the price went over 20.50, but I coild never shake off the impression that somebody is "trying to hold the price down". I have heard of traders supporting the price in the mid day when there is not a lot of volume, but the volume today is more than twice the average (even with the dividend announcement) seems pretty high.

    Am I crazy to think that somebody "artificially" is holding the price down? If I am not, who can do that , and what does it mean for the future price of the stock?

    Any theories? I wish I could post a picture of the chart.
  2. To hold down the price of a stock, 'someone' must have the ability to sell shares to everyone who wants to pay that price.

    Do you really think someone could do that?

    Actually someone can. That would be someone who owns a huge quantity of long stock and wants to unload it without showing just how much stock is for sale. A large pension fund or mutual fund could do that for awhile.

    Are you crazy? that's for you to answer. But what do you mean by 'artificially?' If someone is selling shares, there is nothing artificial about it.

    Future prospects for the stock? That depends on a whole lot more than a single stockholder trying to unload a position. But, IMO, it has zero bearing on the future.

  3. Tracking a single stock has a lot to do with the index futures, and the sector the stock is trading in. If you watched the financials in general, there was a nice spike in the afternoon, then a final 30 min sell off into the close. Right now, we're in a controlled accumulation market. Short sellers are trying to get out of their large short positions in the index futures and financials. They will excecute a large sell program to push the market lower, so they can cover at a low price, or go long. When you have billions under management, you have to play poker with day traders so you can get in under the radar.
  4. Without some really good news in the stock and/or the entire sector to bounce it, maybe it's just a function of JPM coming down hard for the past week on increased volime and running into a lot of resistance as it tries to make its way back up through that?
  5. Good point. I don't know enough to know who's doing it ... nor do I really care. But as these programs hit during the day, I shift the bias of my pairs to either more long or more short and scalp the moves. IOW, the cause isn't important to me but recognizing the ebb and flow is. And as the clowns in Washington pontificate, the market reacts, sometimes strongly. A good example was last Friday when Senator Dodd spoke about nationalizing the banks and the financials ran down hard in the morning. Then the White House (Gibbs) negated that later in the day and they ran hard to the upside. It doesn't get any better than that intraday :)
  6. shaqtus


    Well, I stayed in the last couple of days. My thinking was that there has to be some pent up demand if the price kept bouncing up to 20.50, plus Goldman Sachs was up 15% that day and both GS and JPM are considered to be similar companies.

    It's up close to 20% the last two days (might or might not be related to the monday strangeness) . My initial plan was to wait for it to get to 25 bucks , but in my experience when you get some windfall profits I better take some off the table.

    The fact that somebody is selling so much stock close to the low is a bit disconcerting, but as you said could have been offsetting some other position or may be wasn't happy about the dividend cut.

    The only thing that bugs me is that if somebody wants to sell a whole bunch of stock wouldn't they use block trading? May be nobody wants to touch financial stocks these days.
  7. If you disclose that you have 4 million shares to sell, you will not get a good bid.

    If you are not desperate to sell, you can wait for a bid to appear and then hit the bid. Again and again.

    To me, this is the only way to do it. When mutual funds use the block desk to unload a position, it's your money that gets lost in a bad fill. That does not encourage them to diligently work the order.

  8. shaqtus


    I guess, it's all about the price.
    By not selling at different levels, the sellers (whoever they are) are not creating a massive drop in the price and get better average price (by not creating panic). I am not sure that doing it all in one day was optimal, but I guess they really had to go.