Longwei Petroleum (fka LPIH)

[rru2s]

Article about market makers by a market maker

The intense bids in the last half hour Thursday were a genuine large investor loading the boat. On Friday, it was just a steady stream of different investors until the last 51 seconds. Clearly a market maker wanted to drive down the closing price so that on Monday morning it opens lower and they have a chance to cover their naked shorts that were created by selling shares to the retail buyers who were bidding it up on Friday.

Market makers hate to get caught in a short position as the price goes upwards, yet if no real sellers exist they pretty much have to generate liquidity anyway to do their job, and whatever they sell short they try their darndest to create some kind of downward movement very soon afterwards to cover their shorts lower instead of covering higher and losing money. Hence their objective in a fairly illiquid stock is to keep the price see-sawing back and forth, which is exactly why the stock is sold at a 3 or 4 cents lower price at 3:59pm than the price paid the entire rest of the day. MMs are willing to buy and sell between each other so that they can all cover lower.

Link to article:

http://shockertrades.blogspot.com/2011/05/market-maker-speaks-out-ways-of-market.html