Ask Vendit Off Topic Questions

[Walkingshadow]

freeus,

Somebody asked me that yesterday, and at the time I said I didn't think so. That was because ORCL was down quite a bit in afterhours, and IRF was not. Also, they are in entirely different sectors.

The intraday chart for IRF today is interesting. The stock was clearly gapped up excessively by the MMs, indicating that the buying pressure at the open was mostly retail. This is evident because of what happened next. After the initial fill of the overnight orders at the open at 38, they took it down hard to 35, then reversed it back up again. Very likely, after seeing the orders were retail, they took up short positions, filled the orders, then began dumping inventory onto the market, suckering in panic selling all along the way, which only added gasoline to the fire. The bottom was likely the result of short covering, at which time they took big long positions and proceeded to just walk the thing right back up. Others then jumped in, probably mostly professional buyers, which supported the rally, until profit taking time after lunch at 2pm, by which time the stock had traded up to 39. Net for those who entered and exited at the pivot points was + 9 points on the day (or about 25%), for a stock that ended up down 7.6% on the day.

http://www.askresearch.com/cgi-bin/intraday?index=%24COMPX&intraday=symbol&symbol=IRF&ex...

Note here that the MACD is not a useful indicator here, nor is OBV, PROC, or MFI. However, William's %R (set at 16) and a fast stochastic (5-3-3 setting) could be used very effectively. This will vary some according to a particular stock's personality, but the point is that only the faster responding technical oscillators could have helped you trade this stock.

I'm not advocating anyone try this, since it can be very risky business. But, it might be worth keeping in mind some of the things MMs are up to, particularly at the open and during the first hour.

JMVHO.....

WS

IMHO, the moral of the story is that if a stock gaps up (or down), be very, very careful that the reason is not because of retail buying (or selling) pressure, because this game occurs every day with many stocks in the market in a pretty predictable fashion, usually in the first half hour, but sometimes much more quickly. It is just one of the more common and successful strategies in the MM's/professional's considerable armamentarium for separating retailers from their money.

JMVHO, as always.......

Walkingshadow