To help us to learn tape reading, I am posting the first 2 hours of pii t&s. PII is a stock with daily average volume of about 300K. Yesterday it was downgraded and down $3 yesterday. Today i shorted pii at 49.49 after 49.50 bid was lifted at 10:14:45. The stock didn't go down immediately. Instead, buyers seems aggressive, and taking prints to 49.55. I was patient, but when the bid stepped up to 49.51, I wanted to get out when the offer stepped down back to 49.52. When the offer at 49.52 was lifted, and the bid stepped up to 49.52. I nx to get 49.53 to cut my loss at 10:16:58, but it was held by the specialist. The first print after my order was: 10:17:09 49.52 300 10:17:18 49.30 8400 I was quick to cancel my order b/c the seller coming back. The bid at 39.35 was hit and refreshed several times, but I was patient after I learned the post by Mav here. After the 39.35 bid was hit, you would find several double prints. After the double print at 29, it went up with a double print of 31. I was nervous and then got out at 29. The gain was 20 cents. The bottom was 14, and it reversed quickly back to 50 level. The seller came back and it went back to the bottom, and then reversed again. The stock passed 50 level and climbed up to 70. When you spot a seller, usually you will see buyers as well. It is hard to tell when to get out. I am attaching the 2 hours of t&s for discussion here. I wish to get more insights of reading this t&s.
What you describe is a classic example of why we rarely, if ever, use the NX function (we will when the ARCA deal is done)...if you would have left your 49.52 bid in, you would have to have been filled at 49.30, with 22 cents price improvement, and a nice profit. Remember "no sellers at the top" "no buyers at the bottom" this will help you in reading bid/offer size quotes. Sellers will keep hitting big bids, but when they see 200 shares they tend to stop, since they don't want to run the stock down a dollar for 10,000 shares. You might find this of interest..a small portion of our tape reading powerpoint study guide. (not formatted, sorry).. www.stocktrading.com/tape.htm Don
After seeing a lot of questions posed to Maverick about certain situations and prints, to which he responded that you cannot determine a true buyer or seller by a couple of prints and that you have to see every print to intuitively feel the presence of size orders, I think it is important to recognize the role the Specialist plays in moving stocks. As anyone who has traded listeds extensively knows, the Specialist is out to make a buck. He has to be fair but he is trading his stocks right along with everyone else. The Specialist, not always but often, carries an inventory of stock to sell high and buy low. So when you see a quote of 20.50 x 20.55 100 1000, and you see a lot of prints getting filled on the 100 share 20.50 bid or just a penny above that bid, it isn't necessarily a true buyer, it might just be the specialist making a buck or taking in inventory he knows he can sell higher. Maverick maybe you could explain how the Specialist shows his hand, what moves he makes when he his buying for himself as opposed to filling orders for real buyers. I have often observed and you can confirm or deny this, but when odd lots get printed just above the bid it is usually the Specialist buying. The important thing to remember is there is a lot of static to tape reading. You have to filter out that static by reading all the prints as Maverick stated. Some of this static is the Specialist making a buck, but remember his game is essentially fixed so buying with him usually will prove profitable. Mav, thanks for posting that interview, very interesting. The only point I disagree with is in regards to decimalization. It is a whole new game, stocks don't move as much now. I used to trade for quarters and halfs, now i trade for nickels and dimes using size to make up for the smaller moves. Whereas the spread used to be a teenie at the smallest, now it's a penny or less. I can remember back in the day some of the wildest stocks (INKT, YHOO, SDLI, NSOL.... I'm more of a Nasdaq guy) would have a bid/ask spread of more than dollar.
After you covered your position, you noticed the specialist offering? If so, look to get short again. Always go with the specialist. Also, all stocks have certain characteristics so you should really try to learn the ones you trade often. Try to find similar situations for this stock where there is a stale bid getting taken and see how it acts. I have traded stocks that blow right through the stale bids/offers and take off and I have also traded stocks that take out the stale bids/offers and then pull back, fake and then the buyer/seller kicks in. That is why it is important to know your stock. Oh, and the NX is not useless! Its very very valuable. Just remember that you have to wait 30 secs after you use it to use it again on the same side and you can only NX when there is at least 200 shares on the bid/offer. I NX out of positions all the time. I get out when the buyer/seller reveals himself and is starting to get hit. I nx that size fast cause you know its gonna go. Don has a point though, sometimes I like to go market too because you can get price improvement. However, if you do get a better than expected price improvement that may mean that the buyer/seller is still there and you should look for another low risk entry. Just thought I would add my two cents... -spxdes
Don, Don't really understand what you mean by "no sellers at the top", and "no buyers at the bottom". If the seller is gone at the top, does it mean the stock will move a lot higher even with a little bit of buying? Tape readers know there is a buyer, and so they will buy more to push the stocks a lot higher. At the bottom with no buyers, the stock will certainly move a lot further down because those who have the positions will try to get out with fear, and those short sellers will try to short with greed.
Understand that sellers (brokers, executing firms) will not irritate their customers by slamming a stock down on a few hundred shares....when the buyers go away, the seller stops for a bit...wouldn't you? Same on the upside...if you wanted to cover a short, would you chase a stock up a dollar for 5,000 shares? No way....that's the point of the centuries old adage... Don
The best way to trade with (same side) the specialist is make continuous "outside" markets, and wait for him to "trade through" your price....and fill you higher (lower) when he is filling an order himself. Don
Look at the Open Book. If there is a bid/offer shown on the tape at a certain price but it is not shown in the Open Book then it is the specialist. Watch to see if if he "takes in" shares. If there are a bunch of prints going off at that price and he stays and refreshes then go with him. The specialist is taking a position for a reason. He has access to the order flow so he knows when there is a big buyer or seller that will move the stock. If I see that the specialist is bidding and taking shares then I watch the stock very closely and wait till I see some agressive buying and then jump in. One thing to keep in mind is that if the specialist comes in bidding and then quickly walks after getting hit, dont trust him. I just leave the stock alone usually. -spxdes
You can get the VWAP in realtime from many quote services. No, I never look for stocks with thin floats or high betas. I agree with the lower volume but not with avoiding stocks in the news. News stocks are not easy to trade but the on only way you will ever learn to trade them, is to trade them!