Post by
Jonnytest on May 12, 2011 11:42am
Trying to make sense of what at first does not mak
I have taken the time to talk with some serious market participants in order to have a good understanding of what is going on, and get some idea of what actually happen with the trading of AFA shares during the last two days, and this is what I can deduce from these discussions.
The first thing I was told is that 80 % of the volume generated over the last two days, was pro, algorithm and day traders that were just playing the stock for a 0.005 spread (up or down) ...
The way it came down was as follow. Market Surveillance, realizing that the news was positive and could move the market, order a cease trading. Traders first read of the news was that it was a positive news that should move the stock up.
The pro, algorithm and day traders then push up the bids in order to get some papers and get ahead of the retail buyers, before the opening...
The market upon, the pro, algorithm and day traders push the stock, but since they were only trading the papers between themselves, after having purchase about 3 millions shares, in about 60 minutes, they realized that retails investors were not coming in the market as fast as they had expected, so they started to panic and started to sell there shares in order not to lose any money.
That kill the upward momentum. What you then had was a smaller wave of weak and easy to scare retail investors that came to the erroneous conclusion that since the market was not going up anymore, that the news must be bad, because the market never lies....
Furthermore yesterday the down trading was exasperated, as once again the majority of the trading was made by pro, algorithm and day traders that now tried to make a measly 0.005 on the down trade..
In the mean time, serious investors that understood the press release realized that a bargain was available and they started to place some buy order on the cheap.. So did the pro, algorithm and day traders looking at their charts for guidance the also started to rebuild the bid between 0.065 and 0.07.
In parallel to all of that, you had a market for resources going on full retreated mode, and that just made matter worse..., and that reduce the numbers of real retails investors in the market.
As for the institutions, they do not really care about the retail price, they will once again finance the Company because the results warrants it and the company is executing well its business plan for them to continue to advance the project.
So In conclusion, because of the stupidity of the regulators, that have made a complete travesty of the trading systems, we now have a situation were idiot traders are being paid to create flush trades....
While we the small investors get diluted for the the benefice of the institutions. It time that people start suing the regulators over that....