Small Caps & Me

Friday I got tempted into a position for an account I manage. The stock, a niche machinery maker with solid dividend paying trackrecord, was down over 5%. I have to add here, that I watch the most volatile stocks on a regular basis every several hours. Just a habit I've picked up to see what's moving quickly. I'd also recently seen a presentation of this company and they were saying some pleasing things about the potential in India.

So I have this stock that I'd be comfortable owning, down over 5% and a 3% dividend payout coming soon. I judged that the stock was just seeing a large seller interested in selling quickly. That normally is a bad sign alone. But this stock is very illiquid and 15minutes or so after a large'ish offer appeared at -5% a bid came in - matching the size of the offer - at -7%. I thought: Okay, there's interest down there. I checked it on a chart and saw that the -7% figure was where there had been support several times in past weeks, but it always bounced back up from -7% to 0 to +5% - so a potential move of 12%.

I decided to pick off half the offer and see if the seller would reload or offer some more a bit higher. I also put in a bid for the offer balance at -6% to see if anyone hits it and also a offer at -3% (that sometimes gets a seller to add some more sales into order book). No-one did hit my bid, and 30min later I bought the rest of the offer. 

The stock closed at -5% for the day.

I'm not sure what I'll do with it. My favoured scenario is, that it bounces back Monday of course, as there was no news out Friday to get it knocked the way it was. But I could be in for trouble if the general market sentiment is going to take a beating or if the seller just comes back with the same size day after day.

Will keep ya posted!