What is the Specialist Thinking?

E

El Cazador

Do you suppose that by concensus we could examine an intraday chart of a listed stock and determine with a reasonable degree of accuracy what the specialist was doing and why?

I would think that it would be a very valuable exercise to take the chart of a GNP stock like WCG or AGA or ELY and discuss it.

For example: ELY

It started falling hard yesterday and went down steady without a good bounce. I'm sure there were shorts out there but few if any were covering at the end of the first days fall. Was the specialist dropping the bid constantly to try to find the level where investors would begin buying? As long as the price continues to drop can we assume it is the specialist doing the buying? Is it common for the first big day down in a GNP stock to see no real buying? Should we consider taking on a short position on the first big bad day in one of these patterns?

I really don't know where to go with the questions on this subject but I know a lot can be gained by the discussion of what we see going on in these trades. Let's put some of these under a microscope!

Please add your opinions to this discussion. Thanks
 
Funny you should mention ELY. Although I never trade listed stocks-something compeled me to buy ELY today in the last 30 minutes. Please except that I am not spamming, call it what you want, bottom fishing, possible dead cat bounce, out and out lunacy( all not typical of my style)-but 14ish looked like some type of support to me. I am not a fundamentalist, or particularly news oriented trader. I only bought 1/2 lot on this , since it is unfamiliar territory for me, and am interested in any feedback as to this approach today-should I be committed. Baron, if I crossed any etiquette lines by mentioning a particular stock that I took a position in, I apologize-I'm simply trying to see if there is some future in this type of trade
 
aura0663,

As a friendly reminder to you and all other members, you should edit your original post instead of posting additional messages for the purposes of correcting spelling and/or grammatical errors.

To edit a post, click on the word "edit", which is located at the bottom-right corner of that post. Keep in mind that you can't edit the posts of others. You are only allowed to edit messages that you have posted personally.


El Cazador,

Your idea about discussing intraday charts is a good one. Shortly, we will be rolling out the next version of our message board, which will enable you to embed images into your messages. This should be perfect for attaching charts, level II screens, etc. for analysis and discussion. I hope to have this feature up and running by the end of the month at the very latest.
 
Baron, this is an excellent place. Thanks for doing it! I look forward to the next version.

And for the first time I went back and edited a posted message. Good tip... much better than me admitting to poor spelling. :)
 
Originally posted by El Cazador
Do you suppose that by concensus we could examine an intraday chart of a listed stock and determine with a reasonable degree of accuracy what the specialist was doing and why?

I would think that it would be a very valuable exercise to take the chart of a GNP stock like WCG or AGA or ELY and discuss it.

For example: ELY

It started falling hard yesterday and went down steady without a good bounce. I'm sure there were shorts out there but few if any were covering at the end of the first days fall. Was the specialist dropping the bid constantly to try to find the level where investors would begin buying? As long as the price continues to drop can we assume it is the specialist doing the buying? Is it common for the first big day down in a GNP stock to see no real buying? Should we consider taking on a short position on the first big bad day in one of these patterns?

I really don't know where to go with the questions on this subject but I know a lot can be gained by the discussion of what we see going on in these trades. Let's put some of these under a microscope!

Please add your opinions to this discussion. Thanks
More...

Ok let's get back on topic here guys!. These are the questions remember?


The specialist has to make a market if no available buyer is around. He's probably sitting on some huge losses and is very unhappy. This is actually an edge for traders that few really realize. The specialist has to take risk that none of us do. When there isn't another side he is required to be it. If 90% of the market wants to dump a stock guess who has to pick up 90% of those shares? Do you now feel he is unfairly paid? He's heavily long on a stock that has been in a freefall. He would love to dump some of his position but can't unless selling slows down. The one thing he can do is buy at a price he feels more comfortable buying at. This is why the stock is so low now. He feels good at this price level.

What will happen depends on the future.

Should you take on a position on these as a short? It's usually very dangerous to chase a stock/trade. Short it on a bounce would be my recommendation.
 
I'm sure we could do a stock and take apart what happened, and what the specialist was thinking the whole time. Tell me which one, and I'll do it.
 
ok... I'll bring this thread back to life:

How about we look at DE on Monday the 30th. and break down what was happening.

For me, I traded it short on the opening... the stock was fairly heavy. As soon as the offer was getting hit I went long (at 42.31) and scalped a few more cents out of it. It then bounced around and eventually sold off another point before retracing some.

Anyone want to critique how the specialist was trading this stock?

Fletch
 
First we have to realize exactly how much the specialist controls what is going on. Many belive that if the specialist wants the stock to go up he brings it up...and if he wants to bring it down, he just brings it down at will. If a stock goes up it is because of aggressive buying. The specialist see what is on the book. If he knows there is a buyer he tries to get long. He will play games to try and make the stock look weak. The specialist maintains the market BUT he is not bigger than the market. The specialist participation level depends on the liquidity of the stock. Imagine what the book looks like if the specialist was not involved. What is the real spread. In a stock like AOL or GE the spread is tight without the specialist being on the inside quote. Now in a thinner stock the specialist is usually on the bid or the offer or both. Because the "real" spread might be .50. This is when the specialist will drop a stock quickly..and he will usually get long or reduce his short position in front of the buyer.

Now in DE today: The stock gaps up $1.92 on an upgrade. Salomon raised DE from a neutral to a buy. This is a GREAT SHORT CANDIDATE. Now this is why I always have a daily chart available. You will see that two weeks ago there was resistance at 42.80. The specialist has the greatest advantage on the opening. He opens the stock at 42.75(right below 42.80), which was the high print of the day.

Fletch...if you were short, why did you cover. And why did you go long. Did he lift a short seller. I don't have TOS at my house so I can not look at the prints. But it was definitely a good short. A good thing to use is intraday volume bars on a 5 minute chart. They are amazing sometimes. If you look at the DE chart you will see a big volume bar at the bottom...if you see this you cover a little above 41.00.

 
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