Trading Analysis - 22nd Nov 2018

Alfacomp

22 November 2018

10:30AM


The price recovery continues as per yesterday: 1.4M Buys vs 0.6M Sells leaves the MMs needing 800,000 shares at this point. At some point someone is going to need to find a lot of shares because PI's are not selling them.

2:00PM


Not a single significant Sell over 100K yet (2x 100K Buys though). Yet again we have more than 1M more Buys (2.0M) than Sells (1.0M). This cannot go on forever - eventually those shares will need to come from somewhere.

End of Day


After 2pm things start to become clearer. After 5pm they are much clearer. 

Having allowed themselves to sell 1million more shares than they bought before 2pm the market makers have now realised that they need to start calling upon their tame seller to give them the shares that they need to balance PI Buys. Just before 2pm it was 100K, then another 100K which was immediately followed by a 250K Sell that was not reported until after the end of trading.

Only 10 minutes later there was a 350K Sell, appearing as a duplicated pair on ADVFN but not LSE.co.uk and at 4PM there was another 400K dropped in. An after hours Sell of 118,658 (the rightmost yellow highlighted marker) may have been the only significant Sell coming from a Private Investor this afternoon.

These Sells just about give the market makers a balanced book today. According to my calculations however they are still short of c. 5.5M shares from a short position that was part accumulated before the external shorting interlude of the 20th Nov and part accumulated on that day and yesterday when it appears that the MMs were able to catch the 20th Nov shorters in a vice-like short squeeze.

The MMs now need to close their short position and they will attempt to do this by using the Sells from their tame seller - first using the Sells to hold the SP back and then using them to drive it down so that they can get shares cheaply. If someone else turns up and thinks it is a good idea to try and piggy-back on this behaviour - selling the MMs lots of shares that they themselves do not yet own (i.e. shorting it), then they risk yet again be caught in a short squeeze of the MMs making. The MMs saw exactly what happened on Monday and Tuesday, and then delivered the killer blow to the 20th Nov shorters yesterday.

In principle you could have a group of shorters and a short MM bouncing back and forward playing short tennis like this for a period of time. But like a game of pass the bomb, they both risk being the one holding a big short position when company redefining news arrives and one or both of them are swamped by a tsunami of PI buying.

And make no mistake that news will arrive.


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