Trading Update 4th-8th Dec 2017

Alfacomp

10 December 2017

Update

The 250K after hours trade, only reported after the weekend has be ascribed as a Buy.

This brings the nett trade position for last friday back above zero. It is also rather reminiscent of what happened when Wessy’s long Spreadbet position was being liquidated (23rd Oct -1st Nov) – trading would happen all throughout the day and then there would be an after hours trade that mopped up all the nett trades for the day, returning the nett trade position close to zero. In that scenario it also took 1-2 days for the trade to show up in the trading logs.

So it seems likely that this trade originates from a spreadbet house – but is it a buy or a sell. Earlier in the day 8.50p was available for Sells, but following the 300K Sell at 1:51pm the effective price for Sells fell significantly and these were in the band 8.20p-8.25p at the end of trading, whilst Buys are 8.50-8.55p at the end of trading. Thus it looks like a buy, as would originate from a spreadbetter liquidating a short position.

This restores the nett trade position for Friday to +151K and the overall nett short exposure for the Market Makers to 1.249M. All the graphs now show these updated figures.

Original

On Tuesday the 5th Dec at 4 o’clock Knuttie declared that he had 2M shares purchased under T20 conditions, and that these will not be rolled over or sold, but instead fully paid for  – this is described in more detail in the separate article Knuttie’s Revenge – which provides useful background reading to the conclusion below.

Monday 4th Dec 2017

A couple of notable 100K sells during the day and three Bed and Isa combination trades in the afternoon.

Buying was clearly strong throughout the day, and yet for the second day in a row the SP finished down 2.8%. This was on a high volume of 12.5M (6.41M Buys vs 6.10M Sells) that was dominated by knuttie’s 4.7M Bed and Isa combo at 2:56pm.

Tuesday 5th Dec 2017

Ditto – Buying persistant, but share price down 4.3%. One or two 100K sells but Sells (1.181M by the end of the day) are greatly outnumbered by Buys (1.616M at days end). The market makers position grows to 1.23M more PI Buys than Sells. Volume was 2.8M shares.

Knuttie announced at 5pm that he will be paying for c. 2M T20s in the next few weeks.

Wednesday 6th Dec 2017

Unlike the previous day there were more Sells than Buys, but the SP did not budge. Whilst there were a few 100K Sells the main Sell volumes came from two (believed PI) Sells; 260K at the start of the day and 240K at 1:18pm. Between them these two Sells accounted for most of the -595K nett trade positions at the end of the day.

With the MMs short of shares these two will have greatly helped them out at prices of only 8.26p – this is why they did not drop the price still further, they don’t want to undo the good that they have done so far and encourage further share buying ! Volume is down again at only 1.56M shares traded.

Thursday 7th Dec 2017

No more cheap sellers today. A strong series of Buys of 100K and 50K volumes between 2:47 and 2:50pm led to a clear increase in the price being paid for shares, though this did not translate into any effect on Bid or Ask. Volume was less than 1M – only 896K today, but of these 76% were Buys, 680K vs 216K Sells.  The SP finished unchanged at 8.375p, though the effective mid-price was closer to 8.55p.

Friday 8th Dec 2017

Whilst the final SP was reported up at 8.55p this was entirely down to the closing auction which yielded an uncrossing trade of 100K at that price – in reality though the SP dallied a little with moving up during the day, but a large sell of 300K at 1:51pm put pay to this and the Bid and Ask remained unchanged at the end of the day.

The large 300K Sell, reported after hours, yields a days end nett trading position of -298K. The MMs nett trade position at the end of the week ended at 0.8M positive – i.e. 800K more Buys (by PIs) than Sells (by PIs). That is 800K shares the Market Makers have to go looking for.

Conclusion

On Monday and Tuesday the Market Makers continued to sell more shares than they took in. After the Yellow Dragon announcement on the 30th November the Market Makers allowed the SP to rise more than 20% – possibly with strong dose of buying by shorters who were closing their shorts on this outstanding news.

The Market Makers didn’t let the price go completely on the 30th November, as they would have to have done if they were obliging themselves to run a neutral daybook (buying as many as they sell on any specific day.) Instead they saw this as an opportunity to subsequently short the share by selling shares that they did not have (they did the same after the 18th August short was defeated.)

The MMs probably assumed that Knuttie would be selling them his 2M in the next couple of weeks and saw a ready made profit making opportunity, turning a long position of 1.29M on the 29th November into a short position of 630K at the end of the 30th Nov.

During this week the Market Makers allowed their short position to grow to as large as 1.23M, and were it not for (believed PI) sells of 260K and 240K on Wednesday and the after hours 300K on Friday they would have finished with a much larger short position than the 800K that they ultimately got away with. With what we know about both the MMs short position, the previous short taken out post Q3 results and the firm commitment from Knuttie to pay for his T20 Buys – now is clearly a very opportune moment to Buy. Any further buying pressure will force the Market Makers to up the SP to get the shares they need as they will shortly discover that they are not going to be gifted the shares they need to close their short position.

This article only conveys the personal opinion of the author. Whilst every effort is made to ensure the content is accurate, we cannot guarantee the accuracy of the data shown. This article does not constitute professional, financial or investment advice and must not be used as a basis for making investment decisions.

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