Wednesday, April 18, 2007

Block Buys - an Intraday Look

After reading Richard's article Misconceptions- Bullish Block Trades, I decided to start looking for block trades to examine. Richard's theory is that a block buy at the ask may not be entirely bullish in the near term, as the specialist will likely be short, having had to fill a large order. In order for the specialist to buy back his short position, he needs the price to go lower.

Today, while watching COGT, I witnessed a block trade, which many would say is bullish. The trade went through at the ask. Within 2 minutes, the stock starts selling off. The volume on the block was 108K shares. Once the stock bottomed, I counted the volume by the minute, on minutes that ended on a downtick. My volume count was 134K shares sold. Not an exact science, as obviously there were some buys in with the sells.

Seeing this action certainly does make one pause to consider Richard's theory.

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