Originally posted by lescor
I lost some money on Monday too, and it's clear to me that the reason why was because of the number of large imbalances at the close on Friday, which was the end of the quarter.
For example, I was long NKE but couldn't figure out why because on the chart, it looked like the thing had gapped up. When I looked at things more closely later, I saw that NKE's final print on friday was a full dollar higher than where it had been trading minutes before the bell. I had two other stocks there were in the same boat.
When there is an order imbalance to close the stock, the specialist can gap it anywhere he wants, which is going to give you an out of whack closing price when calculating your fair value. I had been going through intra-day charts of all my stocks to try to catch these, but stopped because it was time consuming. But not doing it cost my $250 on Monday, so now my daily routine is 20-30 minutes longer.
Nobody said it was easy.
Corey,
I ran into the same problem. I have been trying to think of a way to avoid getting hosed by the specialist like this in the future. One of my ideas was to take the "last," right when the market closes, and use that in my spreadsheet as the "previous day's closing price" for the next day. In reviewing the tape and my charts, I noticed that many of the "skewed" trades didn't print until a few minutes after the market closed, sometimes several minutes. My thinking is that if you take the "last", right when the market closes, and plug it into your spreadsheet for the "previous day's closing price," before it has been updated with the "skewed" trades, you may be able to avoid the problem. This might give you a more accurate closing price than if you load the "previous day's closing price" into your spreadsheet in the morning, which is what I have been doing. I haven't tried this yet, but it might work. It would also eliminate the need to go through charts for all your stocks in the morning, comparing the "previous day's closing price" with the "last" price on the chart when the market closed. What do you think?
Scott