General Discussion AGY, page-39

Hi seagull,

Been thinking a bit about this concept of "buy volume" vs "sell volume" that you have been referencing lately.

It seems to have morphed (by some here) from an indicative measure of buy/sell pressure into some idea that it must represent people wanting in or out of the stock. (I realise you haven't presented it as such, btw!)

Let's look at it for what it actually is.
Afaict, you classify uptick vol as orders that go through on the high side of the spread - i.e. if the bid/ask is 11.5/12, then if someone "buys" into the 12 ask, you count this as uptick vol, essentially indicating (to some) that "someone wants to buy in". In contrast, when the bid is hit, i.e. someone sells into the 11.5 level, then this "downtick vol" suggests that "someone wants out".

Now, I see that this might give some indication of the leaning towards either the bid or ask price, but I think this has morphed, quite misleadingly imo, into an assumptions about "people selling out" vs "people buying in"....
Imo the "downtick vol" merely indicates that someone who wants to sell has decided to do so at the current bid price (11.5), instead of putting their shares into the queue at the ask price (12). What I conclude from this, is that for whatever reason, that person/bot/trader wants to sell (usually because they think that the price may be headed down further), and simply thinks that they won't get hit if they join the ask queue. Of course, there may be other reasons they are selling (shorting or creating an impression to sway punters etc), in which case we couldn't conclude they actually "want out" of the stock.

So, the question really becomes, imo, are those people selling into the bid price REALLY just wanting out of the stock, or are they, at that very point in time, simply transacting at the bid price because they are not confident of their queued order at the ask price getting hit? (and this ignore the manipulators and shorters who have may an interest in selling down into the bid, rinse repeat).
There may be a few underlying reasons imo:
1/ they truly want out and don't see any short-term case for the sp to hit substantial vol at the ask price or higher
2/ they see the short-term sp "naturally" sinking further and want to trade down for a pip or three, taking a chance that they'll be able to get their vol back at a lower price
3/ they want to push the price down (benefiting their shorts or trading or accumulation), by taking out the bid volume, and convincing the "market" that people are bailing so they'd better follow suit before their capital erodes

It seems to me that many here appear to be automatically assuming that the predominant reason is (1), when they really have little basis for this, and imo there is plenty of reasoning, especially in the current circumstances, for (3) to be very likely.

In summary, imo, it doesn't make much sense to conclude that transactions at the bid price represent people bailing from the stock, above other reasoning such as short-term trade flow and price pressure, for various reasons not in any way linked to a loss of confidence in the company (possibly quite the opposite). We also need to remember, of course, that all sell vol has equal buy vol.

Anyway, I'm not at all suggesting that you have presented tis uptick/downtick volume in a certain light, other than perhaps it being indicative of "something", so I'm not criticising your sharing of this info in any way!
It just surprises me that some others jump to conclusions - which is probably what the MM wants and expects them/us to do, as they pull their strings and tap our hard-earned.

Just some thoughts, imo.

Cheers


IMO
DYOR