Re: [CANSLIM] Microcap Question

From: Ian <ianstm@shaw.ca>
Subject: Re: [CANSLIM] Microcap Question
Date: Tue, 12 Mar 2002 10:09:59 -0800
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Often times, you will see that activity in microcaps as the market maker takes out stops set at $6.99 and buys some shares. You will frequently see it right before a volume surge - they see some volume bids coming in, and quickly drop the price in order to accumulate some inventory by taking out stop-loss orders.

Last week, I was trying to buy shares in a penny stock (my first in years, but all the CANSLIM characteristics save the low price). The bid-ask was 0.96 x 0.99. I but in an offer to buy another 6000 shares at 0.99. I was watching a streamer and noticed that 40000 shares traded at or below 0.99, so I assumed that my order was filled. At the end of the day the price was 1.10, so I looked at my account and saw that I was NOT filled! The moral is that you are subject to some nasty (unethical?) trading practices as liquidity and price get low. The stock is at 1.40 today, 4 trading days later :(

Ian
  ----- Original Message ----- 
  From: Rob Miller 
  To: canslim@lists.xmission.com 
  Sent: Tuesday, March 12, 2002 7:20 AM
  Subject: [CANSLIM] Microcap Question


  Tom, I'm hoping you can answer this question for me since microcaps are your main interest.  I've not dealt with them much in the past.  I've been following a few microcaps (<$80 million market cap) and I'm confused about the movements in the bid/ask prices.  Assume the spread is 7 X 7.15 with most trades, small lots, split evenly between those hitting the bid and those taking the ask.  However, the action is slow.  Then, the bid suddenly drops to 6.90, 6.85, 6.80, 6.75.  Several trades go off at 6.75 over just a few seconds, then the bid jumps back up to 7.00, at which point the trading becomes slow again.  The ask never changes.  In some cases, trades go off below the bid price.  
   
  I can understand when someone withdraws their bid causing the bid to drop, but it seems strange that several trades go off at what appears to be far below the prevailing market price.  No trades, bid drops for a few seconds, a few quick trades, then bid goes back up.  What causes this?  It seems to scripted to be accidental.    
   
  Thanks,
  Rob 

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<DIV><FONT size=2>Often times, you will see that activity in microcaps as the 
market maker takes out stops set at $6.99 and buys some shares. You will 
frequently see it right before a volume surge - they see some volume bids coming 
in, and quickly drop the price in order to accumulate some inventory by taking 
out stop-loss orders.</FONT></DIV>
<DIV>&nbsp;</DIV>
<DIV><FONT size=2>Last week, I was trying to buy shares in a penny stock (my 
first in years, but all the CANSLIM characteristics save the low price). The 
bid-ask was 0.96 x 0.99. I but in an offer to buy another 6000 shares at 0.99. I 
was watching a streamer and noticed that 40000 shares traded at or below 0.99, 
so I assumed that my order was filled. At the end of the day the price was 1.10, 
so I looked at my account and saw that I was NOT filled! The moral is that you 
are subject to some nasty (unethical?) trading practices as liquidity and price 
get low. The stock is at 1.40 today, 4 trading days later :(</FONT></DIV>
<DIV>&nbsp;</DIV>
<DIV><FONT size=2>Ian</FONT></DIV>
<BLOCKQUOTE 
style="BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-RIGHT: 0px">
  <DIV style="FONT: 10pt arial">----- Original Message ----- </DIV>
  <DIV 
  style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B> 
  <A href="mailto:rmiller2@carolina.rr.com" title=rmiller2@carolina.rr.com>Rob 
  Miller</A> </DIV>
  <DIV style="FONT: 10pt arial"><B>To:</B> <A 
  href="mailto:canslim@lists.xmission.com" 
  title=canslim@lists.xmission.com>canslim@lists.xmission.com</A> </DIV>
  <DIV style="FONT: 10pt arial"><B>Sent:</B> Tuesday, March 12, 2002 7:20 
  AM</DIV>
  <DIV style="FONT: 10pt arial"><B>Subject:</B> [CANSLIM] Microcap 
Question</DIV>
  <DIV><BR></DIV>
  <DIV><FONT face=Arial size=2>Tom, I'm hoping you can answer this question for 
  me since microcaps are your main interest.&nbsp; I've not dealt with them much 
  in the past.&nbsp; I've been following a few microcaps (&lt;$80 million market 
  cap) and I'm confused about the movements in the bid/ask prices.&nbsp; Assume 
  the&nbsp;spread is 7 X 7.15 with most trades, small lots, split evenly between 
  those hitting the bid and those taking the ask.&nbsp; However, the action is 
  slow.&nbsp; Then, the bid suddenly drops to 6.90, 6.85, 6.80, 6.75.&nbsp; 
  Several trades go off at 6.75 over just a few seconds, then the bid jumps back 
  up to 7.00, at which point the trading becomes slow again.&nbsp; The ask never 
  changes.&nbsp; In some cases, trades go off below the bid price.&nbsp; 
  </FONT></DIV>
  <DIV><FONT face=Arial size=2></FONT>&nbsp;</DIV>
  <DIV><FONT face=Arial size=2>I can understand when someone withdraws their bid 
  causing the bid to drop, but it seems strange that several trades go 
  off&nbsp;at what appears to be far below the prevailing market 
  price.&nbsp;&nbsp;No trades, bid drops&nbsp;for a few seconds, a few quick 
  trades, then&nbsp;bid goes back up.&nbsp; What causes this?&nbsp; It seems to 
  scripted to be accidental.&nbsp;&nbsp;&nbsp; </FONT></DIV>
  <DIV><FONT face=Arial size=2></FONT>&nbsp;</DIV>
  <DIV><FONT face=Arial size=2>Thanks,</FONT></DIV>
  <DIV><FONT face=Arial size=2>Rob</FONT>&nbsp;</DIV></BLOCKQUOTE></BODY></HTML>

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