Ok, I write trading systems, and as such watch the market quite closely. Well for the past few couple of months an interesting algo has revealed itself. I am thinking it is revealing itself because many are using it.
Here is the trick and it is really apparent in pre-hours or after-hours. Find an equity that is at least semi-liquid, and has upward momentum for the day.
Then look at the time and sales. What you are looking for is an out of place low sale as the one shown as follows:
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Look at the actual time and sales of the illustrated equity. I will not name the equities where I have found this pattern.
This equity was up, and the pattern seems to be that they look at the bid ask spread and do a transaction at a price that does not belong in the structure. The bid ask spread is 10.40, and 10.44, but there is a transaction at 9.81. Don’t you find that odd?
You could argue that maybe the price went down because there was no bid that could deal with 15 lots. BUT right after the transaction there was a buyer for 17 lots. This means that the buyer did not need to sell at 9.81. The buyer could have gotten a higher price than what the transaction went through.
OR, here is another hypothesis, what if this was a bear raid to drive down the price? After all if a buyer saw a deal at 9.81, why not 9.70? What if this is the sort of malicious short selling that is killing this market?
Now getting back to the uptick rule. If this was a seller they could sell at 9.81, though I have no idea why they would sell there. Though if this was a shorter they would have to short at 10.41, or something along those lines.
Does this algo trick work? Yes it does! You only see this trick when the market does not go for it because these transactions look "out of place".
That’s why I argue, BRING BACK THE UPTICK RULE!!!
For those wondering is this trick being used against Citi? Let’s let the time and sales talk for themselves.
Add fear and that this company might go under… Well you get the picture don’t you!!!!