Trading Analysis - 18th Oct 2018

Alfacomp

18 October 2018

11am


Following yesterday's observation that the Market Makers are currently willing (and in fact have little choice) to move the SP in response to buying pressure we see the same phenomena yet again.

This however is only in response to medium sized buying pressure - 1.8M shares in 3 hours of trading only hints at 4-5M over the course of the day.

The classic spiked buyers behaviour is observed in the first half hour - if you don't like paying more than you have to for your shares then you should wait at least half an hour and you can pick them up 0.6p cheaper. Perhaps delayed sells will show up or maybe MMs are simply taking advantage of the overenthusiastic - we shall see later. 

What is clear is that going on the currently revealed information there are over 1M more Buys than Sells already today.

End of Day


Whilst the rest of the day is an interesting story of persistent buying interspersed without occasional large sells - 354,699 at 11:35 and 250,000 at 15:46, both of which caused large drops in the advertised bid, the major story is the arrival, after hours, of a 1M trade timed at 8:03am and priced at 29p (marked in green).

Normally it is relatively easy to determine the type of trade purely from the relationship to the Accumulation-Distribution line at the time. However the large size of this trade and its delayed report suggests strongly that this has been worked for some time - the question is - is it a Buy or a Sell ?

Let us consider the possibility of a Sell first - this is shown in the chart above. Over the course of the day this early Sell would appear to have yielded a relatively balanced trading day - roughly half a million down at the start and half a million up at the end. Do the Market Makers have crystal balls though ? Could they have predicted that the 98 individual Buys today would have yielded such a balance? I think not.

Ok could it be that this 1M trade was a Sell to fill the hole brought about by the previous days excess of Buys - after all we have many times in the past seen such trades chucked in in the last half hour, or after hours, to bring the nett Market Makers position back to balance (eg recall the Wessy selldown) - could this be the same but simply delayed over until the next day ? Again I think not as the excess of Buys in the previous day was only around 473K and there were only a couple of sells that managed to reach the heady heights of 29p. The idea of paying someone 29p for shares now to fill that hole seems unnecessarily generous, nay foolhardy.

Let us therefore consider the possibility that this is a large Buy, potentially first started around 1pm yesterday afternoon. From that point the Bid and Ask increased multiple times despite the nett trading position showing no significant buying excesses after that time - that all seems to make sense.

It is not clear however, how the completion of this large worked trade at 8:03am might affect the trades immediately following it today as it is fairly normal for the early birds to be fed the expensive worms in the first hour or so of trading, and today seems no exception.

The end result on todays balance of trading is now very significant, as can be seen below.


The results in an excess of Buys vs Sells of over 2.4M - is this believable given the relatively small rise of the SP on the day ? Well it seems fairly clear that Market Makers are selling short at the moment so why not, especially given the fact that the 1M can most fairly be ascribed to the previous day, when we had over 6% rise in SP.  

Is the overall size of the MMs short position believable ? Well as can be seen below we're still not up at the 6M+ level that was reached during the strike so the precedent is definitely there. The alert reader may recall that only yesterday I suggested that the MM who is short seemed to now be in the position of having to 'double-up' on their bet - this is exactly what seems to be happening. They are forced to increase their short size but are hoping it makes it easier to close at a profit by having a higher average for the shares they have sold, but which they don't yet own.

They must be hoping that the buying pressure does not persist because they may not be able to try the same trick twice - with less than 10M warrants outstanding they would not be able to take their short to the 10M level. Their only hope may be First Island, and to trigger these sales they may need them to drive the SP somewhat above 31p once again.

 

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