subject: Buying Low and Selling High is No Challenge in Stocks OTC : FLKI [print this page] Buying Low and Selling High is No Challenge in Stocks OTC : FLKI
Day traders in stocks can shake you up, but they are a necessary evil !
Don't you just love the predators? I'm speaking of course of the pro-traders aka MM's and two of their "tricks" reported to me in an interview held yesterday with a large Market Maker in small cap stocks. I am an analyst for the Automobile After-Market Industry, and am researching access to financial markets by the smaller to mid-size companies of that industry.
As I have extensively covered Falken Industries Ltd whose stock market symbol is FLKI, I inquired as an example about public trading as it concerned that company. My interlocutor a senior trader at the market making firm indicated that his company makes a market in the FLKI stock, and he confirmed that they have been visiting short term tactics (all perfectly legal for a market maker who is responsible for the liquidity of a stock) on FLKI hence my sudden curiosity the market maker's considerable interest in the stock makes it all the more attractive to short term traders (which doesn't count me) and speaks of a maturity in the stock that is orgasmic for intermediate and longer term investors.
The key question presented during the interview was "How do you buy a strong steady riser like FLKI on the "cheap" and resell it on the "high", an essential process for the day or short term trader, I was told that it is a no-brainer process once you get the knack of it and can be automated. This is how they do it as demonstrated I was told from some incoherent (to novice as I) behavior in FLKI stock who nevertheless continues its steady rise and maintains its STRONG BUY rating with technical analyst serving the markets on the internet and as any investors' "DD" (due diligence) will confirm.
I learned the following.
The intra-day dump.
(i) Following a buy of at least 10,000 shares at the offer, the trader will dump 5-10,000 shares on the bid(s) once or twice a day, then immediately take the highest bid making sure his bid shows on a Level II screen (a service showing the bid and ask for a stock) ie 5000 shares or more and wait for the panic in unknowing or novice traders, they'll dump like crazy the usually small positions they have and the trader picks up 20,000 or more shares at a 25-30% discount from the offer. Once the dump is over the trader quickly cancel his bid even if unfilled and put in a sell order (also for 5000 or more share so that it shows on a Level II screen) just above the lowest offer the trader will keep the offer just above the lowest offer and take your sales as they come the trader should never take or stay at the lowest offer since success lies in the upticks, pulling the stock price upwards; the game of profit making intentions.
The closing dump the ultimate greed (my thought !).
(ii) A Market Maker has 90 seconds to fill an order, so to close a stock on its low is a sure fire way to panic unknowing or novice traders. To close on a dump at the close of the market is certain to provide an entire overnight period for the panic to fester and grow in the minds of unknowing and novice investors ! These traders will dump on the bid less than 90 seconds before the close preventing a regular investor order to be filled in time to recover the price. As an example, a 5000 share dump on the bid occurring 58 seconds before the close guaranties that closing price since Investor purchases at or near the offer cannot be filled within the remaining period. The stock closes at a low, panicking their target novice traders. Before the opening the next day, the trader importantly puts in a bid in at 1 cent or less below the lowest offer at closing on the prior day and sweeps the panic sales the following morning. This activity generally reveals itself in a pattern of a stock opening low and closing high (such as that of FLKI) save for this exception which generates the following morning a magical recovery of price. The closing dump is only used after a multi-day period of good volume and steady increase in the price of the shares.
In the example case ie FLKI, we were able to ascertain such a pattern. The positive aspect of this maturing process or dubious honor of recognition by the "Street" is that it will increase the attractiveness of the stock for traders, increasing volatility assuredly, but liquidity as well.
There is room for all, in the case of FLKI, the fundamentals are excellent, it is rated "Current Information" by the OTC, the highest rating available in its market, its business is real, its product lines globally known, and its stock is perfect for investors like me, and now even for the aggressive short term traders !
