I was concerned about the lack of supply on the offer side of the market at yesterday’s close, and the market makers have taken advantage of the situation.
In yesterday’s edition, my advice was to put in a limit order at $.75. The stock closed at $.72 yesterday, and reopened this morning at $.81- that’s a 12.5% gap in the price.
I don’t like gaps at the open. Over 50% of the time, the gap gets filled. Gaps are like a vacuum in nature, and nature wants to fill a gap.
You can plainly see from the chart the stock has gapped open a described above.
Typically, in a gap situation like this, the market makers come to work in the AM and find dozens of new market orders on their desks. They buy out the existing offers for their own accounts, and then short the stock to market orders, with the intent of buying back when the buying is exhausted at lower levels, and scalping a few cents for their trading accounts.
In the case of a small stock like this, it is always best to stick with your initial maximum limit price. I advised $.75, and I am sticking to it. If you paid north of $.80, you might have to watch the stock trade down a little before it trades back up.
Over the long term, I doesn’t mean much. However, maximizing your trading strategies is always wise. Keep your limit order of $.75 in place for a couple of days and see if it gets filled. With every Wall Street fund manager turning into a weatherman these days, we should have a chance to reload at the $.75 level.