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Tips on identifying the end of a drop

Discussion in 'Ask any question!' started by projecttoday, Aug 31, 2019.

  1. projecttoday

    projecttoday New Member

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    A top-rated stock drops 7% in one day for no apparent reason other than being over-bought. This should be a buying opportunity. But the stock might have more drop yet to go. I realize calling the bottom perfectly every time is impossible and I'm not the only one looking for this Holy Grail of bottom picking but what I'm interested in is the immediate aftermath of a plunge and I don't see that discussed much. Are the usual oscillators and strength indicators thrown off during a plunge? Or not? What do you recommend? What do day traders do?.
     
  2. Mitzter

    Mitzter Member

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    Daytraders look at the tape for a ‘held bid’ or a wall of bidders on the level 2. Also an indicator is a long wick at the bottom of the intraday candle, meaning the stock is showing strength. At last if a formation is building at the bottom and starting to show higher lows. The odds are then in your favor for a bounce or a reversal.
     
    anotherdevilsadvocate likes this.
  3. projecttoday

    projecttoday New Member

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    Just the type of tips that I was looking for. So a "held bid" is when the bid amount and bid quantity doesn't change for a while? For how long? I would assume longer for lower-volume stocks than higher-volume stocks. I use Interactive Brokers which gives the bid amount and quantity on the "Classic TWS" screen, bid amount only on the "Mosaic" screen. Where do I find a wall of bidders? Level 2? For forming a bottom, do you look at a line chart for this?
     
  4. Mitzter

    Mitzter Member

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    A held bid is showing a small bid on the level 2, but on the tape you see large sum of orders coming through, but the price isn’t budging. Therefore the bid is holding. This differs extremely between stocks, because of volume and the float.

    A wall of bidders you find on the level 2 screen. You see multiple market makers around the same price with large quantities bidding.

    For the chart you should use candlestick charts.
     
  5. projecttoday

    projecttoday New Member

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    Sorry, but what's level 2? The tape?
     
  6. Mitzter

    Mitzter Member

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    The tape is the ‘time and sales’. The level 2 is the ‘order book’. Try Google images for examples :)
     
  7. projecttoday

    projecttoday New Member

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    Okay. At this point I am starting to catch on. And this is very informative! I didn't know this was available right under my nose. Thanks so much for enlightening me.
     
  8. Mitzter

    Mitzter Member

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    You’re very welcome! Not many traders know these things and there is not much information available on it. The tape is a hidden treasure ;)
     
  9. projecttoday

    projecttoday New Member

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    I see there are subscriptions involved for the full level 2, at Interactive Brokers, at least, and 2 choices each for NASDAQ and NYSE. So I guess I should get the NASDAQ total open view and NYSE open book the premium choices in both cases. Doesn't seem to me that ARCA by itself would work too good. Make sense?
     
  10. Mitzter

    Mitzter Member

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    ARCA is one market maker, mainly related to NYSE. You want to see all the market makers. There is often a monthly subscription fee to get this data.
     
  11. projecttoday

    projecttoday New Member

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    Yes, there is a subscription fee. I wonder why they offer just a subscription to ARCA. Also, it says "Requires NYSE (Network A/CTA), AMEX (Network B, CTA), and NASDAQ (Network C/UTP)". That isn't anything additional, is it?
     
  12. Mitzter

    Mitzter Member

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    I’m not sure. To be honest I never really understood all these options at Interactive Brokers. At other brokers it’s just one level 2 subscription and that gives access to the visibility of all the market makers.

    Unless someone else jumps in this thread to answer your question, it might be best to ask Interactive Brokers.
     
  13. projecttoday

    projecttoday New Member

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    Okay. Yes, if anyone knows, please post.
     
  14. Unicorn Dreams

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    If I were to daytrade plunges I'd probably make some sort of low risk inside day strategy. When it comes to knowing when price will reverse there's no gaurantee unless you believe some institution has locked up a large number of shares over a long period of time. Some clues that might help are lower volume declining days indicating low supply, sometimes absorbtion can occur however which would be high volume with a wild price swing and big stop out. So you're either looking for declining volume with declining price or high volume churn with a large stop out.
     
  15. projecttoday

    projecttoday New Member

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    Thanks, Unicorn Dreams. So you're monitoring volume, stops, churn (volatility?), and institutional trading. I don't recall seeing stop numbers. Where are these?
     
  16. Unicorn Dreams

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    Large stop outs happen quick, a key to identifying them would be large volume with long wicks on the candles. These stops provide liquidity for bigger institutions, because a large institution has locked up a large number of shares it's usually safe to assume most supply has been accounted for in the short term.
     
  17. projecttoday

    projecttoday New Member

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    Thanks. I definitely need to bone up on candlesticks.
     
  18. projecttoday

    projecttoday New Member

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    Mitzter,
    I'm confused about what the subscription is for. I know you're not well-versed in IB's options but what am I trying to see again? Without the subscription you get the bid and ask listings when you open Level II. It does say at the bottom:
    Additional sources available: BATS, BEX, ISLAND. Subscribe (button), No Thanks (button).
    So I subscribed to NYSE ArcaBook and NYSE OpenBook. (I did not subscribe to NASDAQ.). And now when I open Level II for an NYSE stock there's no change. I get bid and ask listings and the same message at the bottom. Is the subscription supposed to add in BATS, BEX, and ISLAND? Or what? I need to know before I call IB. Thanks.
     
  19. OldFart

    OldFart Well-Known Member

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    My bad, I didn't read the full question.
     
    #19 OldFart, Sep 6, 2019
    Last edited: Sep 6, 2019
  20. projecttoday

    projecttoday New Member

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    I'm sure he's referring to Level II quotes. But what's the subscription for?
     

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