Using level II as a predictor like that is not the way it works. If you look at Level II for most stocks, there are always some Asks that are way over priced. I think SIRI had some at $1000 per share. I don't know why traders and MMs do that, but that's how it is. I know there are all these strategies around straw bids and asks to see what will happen. The only thing that matters is the Bid. You can't assume that when the shares trade below that level, that the next step is to jump, in this case to .04, or as MGTY said, to .50, just because all the shares are now gone. That doesn't happen. New bids may emerge for the same low price, and the only way to sell shares, is to lower Ask to near or at the bid. No one, certainly in this stock, is going to take the bait at .04, let alone .50. They'll bid .015 and let it sit till someone wants to sell. Sure, if there's awesome positive news, then players start entering the fray and will have to outbid for scarce shares, forcing up the price. Bottom line, you can't assume that if there are 10,000 shares in the level II queue for sale, that when they trade, the next batch of shares will sell for some ridiculously high Ask that's been sitting there. Doesn't happen.
AI
