Trading Analysis - 17th Sept 2018

Alfacomp

17 September 2018

End of Day

First we need to be confident that we have correctly ascribed the trades in the very busy trading period between 8 and 9AM - the chart is shown expanded in this region below:-


 

Then onto the overall chart for the day:-

The trades reported after the end of trading make a great deal more sense of the chart today. These constitute 3x500K Sells, all marked in Green and 1x600K Buy just before the third 500K Sell. As you can see these sells are timed to drop the nett trading position down below the level of +0.5M more Buys than Sells. The overall result is to leave the end day nett trading position close to neutrality.

Today, of course has made no impact on what we believe to be the Market Makers (taken overall) need for 4-5 Million shares that have been sold but not yet purchased. However it is a good thing that it there is now strong circumstantial evidence that warrants are now starting to be consumed (albeit pre-sold) - we might hope that the remaining 4-5M of shares needed might come from the remaining block of Atlas warrants - after all these were last consumed on the 13th August when the share price was again in the range 26.50 - 27.10p.

The only problem with this hypothesis is that warrants exercised/pre-sold obtained by MMs at the current price would cost them more than was previously obtained for the 4-5M shares sold short by them in the last 10 days.This would seem to make no financial sense so how do we understand the situation ?

We might consider the situation where one market maker is holding the short position (MM1) but another (MM2) is currently controlling the market price and is in the position to receive the warranted shares being pre-sold. MM2 is quite happy to continue selling to PIs at above 26.5p and dipping into their warrants pot whenever they need to - as per today. However MM1 is doing something different - they are currently sitting back and hoping that the Share Price falls below current levels and that they can close out their short then.

If buying continues as per today then MM2 will reach the bottom of their warrant block in 2-3 days and then MM1 will have a big problem. If positive news arrives this could happen even sooner than that. We need to consider the possibility that the MMs do not always behave as a single coordinated entity and in periods of great change different strategies may be being played out between them.


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