Wednesday 7 April 2010

Tricked Into Selling Based On Orderbook Depth

This stock I was watching (and owning for 3rd party) had moved up 70% yoy and also had a daily gain of 4% on no news. I looked at the order book and there was something like this

Offfer
200   @ 389.5
140   @  388
3900 @ 387

Bid
190  @ 386.
290  @ 385
200  @ 383.75
240  @ 382

The point being: What I perceived as reistance at 387. So I sold my position of 1k in two 500shs lots. I should have know when I got filled immediately on first sale that something was wrong. The 2nd lot was also hit as soon as I offered.

What I think in hindsight. There's a buyer of 35-40'000 shs who puts offers in to keep the rise in check (or reinforces 387 with say 2k shs), not letting it move by more than say 4% on a daily basis. 

And I was dumb enough to fall for it.... :S 
Maybe the lesson is: Unless someone is hitting decent size bids, and them not returning, then it's a good idea to sell. However to sell and not dent price or order book bid size is a bad thing.


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