Market Makers: Tricks of the Trade

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HIET gets a Well's Notice late in the trading day Thursday (7/8/2004 http://biz.yahoo.com/bw/040708/85656_1.html ) and plummets from 1.85x1.90 to .71x.74 very near the close.

around 1.50, or so there seemed to be a hesitation in the stock, as though it wanted to turn right there.

then, absolute carnage.

the stock did begin to turn in the last couple minutes of the session, closing .79x.80.

today (7/9/2004) it gapped to .97x.98, then and ran nicely to about 1.30.

wtf? a Well's Notice (whereby notifications are issued by SEC regulators to inform individuals and companies of completed investigations where "infractions" have been discovered) is just about the worst news a stock could receive. what made the HIET plummet such a terrific trading opportunity?

turns out this little development is a gold mine for mms. you can bet as soon as the mms found out that HIET received the Well's Notice (likely before the news was released), they began to systematically short the stock with as many shares as they could get their grubby hands on (a little trick the average trader can't duplicate on stocks below $5.00).

they gotta cover those shares sometime! combined with savvy traders who know they have to cover, traders know that a lot of buying must come into the stock sooner or later. for HIET it happened right away, as the stock made a ton of money for a lot of traders this morning--especially those with the balls to buy right at the end of the session yesterday (not me!).

just goes to show, good money can be made in any market, even the crappy one we have today.

it doesn't always happen so fast, however. just take a look at the stock formerly known as SEIEQ (now SELA).