(This guest post originally appeared on the author’s blog)
Maybe it is just me but did anyone else have the feeling retail day traders were actually showing their numbers today? With tech catching solid bids in the afternoon on the heels of Amazon’s post earnings trading, I could not help but think the little guys were supporting bids. Two examples.
Example 1: Priceline had a massive gap much like Amazon this morning which held until some profit taking came in pushing the price back to the 192 level. My idea off the open was long PCLN off the 192 level, this was a test to see if retail would come in and try to make a few points. 100 lots a time were taking the offer, this is more or less the little guys. *Institutions yes they break up orders into 100 shares, but if they really want something they will take 1k-5k in a single print over and over again. Throughout the entire day priceline never really dropped back significantly, much like Amazon (seeing this price action gave the day trader confidence in the trade). All the tech traders were itching for another beta name they could jump on with less risk of the trade going against them because its the school of fish mentality.
Example 2: The last half hour of the day bids starting coming in on Monsanto, much after the company reaffirmed 2010 guidance. This alerted me, 1. Retail traders got whiff of the news much later once it hit the regular news wires. 2. retail interpreted it as positive, AFTER institutional guys sold it off hard around noon and retail got SHORT with them. These two signals coupled with smaller offer taking in the 100 lot size told me this is gonna snow ball because the offers were thin, with gaps in the book. Once the PPS move up a point, retail got freaked out and started covering their shorts, one after another after another. Monsanto by this point is trading with a 71 handle, volume in crescendo. Retail panics and full blown short covering combined with retail getting long for scalp perpetuated the rise/squeeze. I could be wrong but this type of price action late in the day means retail is slowing coming out of the woodwork, testing the waters. I believe retail was much more confident due to the fact they had nice profits from PLCN running 10+ points from the gap. The market gods let them have this one.