I didn't mention bots or algos because I didn't see too much evidence of them influencing the price this week. They were there (always are - see below), but as we saw on close yesterday they chose not to intervene in the closing auction to force the price one way or another. Next time someone posts broker data you'll notice brokers such as AIEX (https://www.tradeweb.com/our-markets/institutional/trade-cycle/automated-trading/) listed in the top brokers - they're always there. Automated trading is what they do. Bots and algo's are a fact of the market and they constantly trade in EXR.
The question isn't 'do they exist', the question is 'what influence do they have on the price?'. The response to the former is obvious, but the response to the latter is not always clear. Sometimes when you can see micro trades pushing the price one way or the other it can be fairly obvious - same when you see trading activity in the closing auction which pushes a price one way or another. Less clear are the trades executed (as outlined below) at 10:36am. The trade didn't alter the price on the ASX or CXA, can only have been executed by a professional market participant and seemingly serves little purpose. One thing I've noticed is that there are more other algo traders regularly in EXR (other than AIEX that is), so these micro trades may be executed to influence the behaviour of competing algo trading firms.
The only way to know is to understand the logic that drives the algorithm that executes these trades. There are a number of inputs to consider when you try to understand how a share price might be influenced. One of the obvious things is the make up of the share register. EXR is made up of a large number of small (relatively) retail investors, has no one person or entity with more than 5% of SOI and a market cap of more than $100 million. Whilst volume has been relatively low lately it still tends to trade around a million shares a day. All of those circumstances lead to conditions which allow the algo traders to buy and sell positions for a profit. Like all good parasites, the algo trader doesn't want to kill the host, all they want is sufficient volatility and volume to move in and out of their position.
Another thing you'll notice the next time someone posts broker data is that the machine traders are often reasonable balanced in their buying and selling. What's clear is that they move into and out of positions quickly with reasonably small spreads to make their profit, that's their business model.
As for broader market trends this year I'm bullish. Calendar year 2022 was a bear market everywhere and we were not immune. Companies that win are companies that actually produce stuff, but even they have been driven down. I'm in a gold miner/explorer that is sitting on a cash and gold pile of $114 million, but it's market cap on Monday was $400 million. It is producing above target, and at lower AISC with significant upside potential for new mines. Probably not surprisingly the price jumped this week when those metrics were announced to the market.
If you read the financial press you'll note a few key themes. We've got the usual doom and gloom merchants who've successfully predicated eighteen of the last two recessions. There's never a shortage of them. There are also a lot of funds managers who openly state they are sitting on cash waiting for opportunities - as well as retailers who were spooked out sitting on the side lines.
My favourite are the predications about doom in China. First doom was predicated because they were shut down due to Covid, now doom is predicated because they opened up and the virus is spreading. My guess is they'll get through it pretty quickly, most people will get it (like here) and it will be a minor inconvenience for a few days, but as the year progresses - like the rest of the world - we'll move on.
Once that capital starts flowing back into the markets (and history and common sense says it will) momentum will turn. My opinion is that capital markets react more quickly and in extreme ways than ever in the past. Real time news, on line trading and increasing numbers of investors compared to other times move prices more quickly and dramatically. Think of the Covid crunch and the 'V' shaped recovery. I think we'll see more and more of that in the future.
Anyway, they're my guesses, people can form their own views. But I form my views on observations of what is going on, particularly in EXR, and as anyone here would know my view has been formed over years. Like my gold miner, I could see no logic to the price decrease (I could see reasons - but not logic) and that's the way I feel about EXR. I look forward to the year with optimism.
As for drivers of price. No single announcement will drive the price. I suspect many of us remember well when the share price would increase 50 or 60% on individual pieces of news. One thing that's worth remembering is that the price would jump from say 2c to 4c - giving a 100% jump off the back off a good drilling results (Nomgon for example). Well the price regularly jumps the same amount on news now, that is by 2c (not 100%), so keep that in mind when we get a good drilling or flow result. My view is the accumulation of good results is what will attract take over interest, and the attraction of take over interest is what will massively re-rate the SP.
Anyway - happy new year all.
EXR Price at posting:
15.5¢ Sentiment: Buy Disclosure: Held
(20min delay)
