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Gitanshu:
The term "painting the tape was coined many years ago. It was a practice
that was
much more common in the 50's and 60's when the public was 80% plus of the volume
and the institutions were the other 20%. Tape reading was an art practiced
by the traders
of the day. A trader would paint the tape by buying say 2000 shares
in small lots, i.e.: 27, 27, 27, 2s27, 27, 27 2s27 etc. He might clean the
book at 27 and see what happens. If he saw that his action had created some
interest he might even bid 7/8
to protect his position. He might also start taking stock at 1/8. The
floor brokers might
see the action and join in. Then the upstairs traders decide that XYZ looks good
on the tape and they join in. Now if someone wants to buy 2000 shares it is
usually
printed in one block. The previous practice of painting the tape to
generate more buying
is no longer sanctioned by the exchanges. Now that the institutions control
over 80% of the volume the last thing they want to do is attract attention.
When I was a trader for a mutual fund we had to make up a summary sheet of
all the stocks we bought and sold listing the number of shares, the
average price and the closing price.
If I had not opinion of the market or that stock on a particular day I
would enter 1/2 of
my purchase order, market not held. I have put the onus on the floor broker
to use his
insight into the stock as to how to execute it. After I had received back
the execution
I would wait to see if the stock retraced down, in the case of a buy, from
my last executed
price. I would use limit order to buy the remainder of my position.
Hopefully if I was able
to buy the balance on a scale down my average price that the portfolio
manager would see
would not be as bad as if I had given it all to he floor broker to execute.
If I ahd to pay
up for the balance then my average price would look very good, but
unfortunately the
fund had to pay more because I was not smart enough to buy the whole position
at or
near the low for the day. As you can see it was a catch 22 situation. The
fund started what
was a new position in RCA. We would buy stock every day. Now one thing to
remember is that most trading desks want to clean up a position before the
close. They have a lot of paperwork to do and they want to get out of there
on time. I would try and get all executions
in 15 minutes before the close for this reason. Well for some reason RCA
after a while would get hit near the close and make my average price look
bad. I now have an idea
to improve my average price. I will wait until the close and instruct the
broker to buy
the 20% of the order that I have left on the close. This worked out well
for about a week
until I was called into the office of the VP who told me that the
specialist had complained
about what I was doing. Needless to say my game was up. He was no longest
my friend,
of course I knew who he was even thought I had never met him.
I will make a guess as to what happened concerning the GLW example you
listed below.
An institution under bought what he was instructed to buy for whatever
reason and just wanted to clean up the order after NY had closed and that was
the best offering in the OTC market that he could get.
Norman E.
Gitanshu Buch wrote:
>
> >Could you explain a little more about what you mean by "tape painting"? I
>
> This past Friday's action is a recent and excellent example.
>
> Watch last hour Friday and first hour today to see what and how it gets
> done.
>
> Pull up intraday charts on any free service for the following:
>
> EMC: 3% move up in the last 25 mins on Fri and no follow-thru today.
> PAYX: 5% move in last 30 mins on Fri and no follow-thru today.
> CSCO: 3% spike up in last 30 mins on Fri and no follow-thru today.
>
> Downside:
> S: 4% move down in 1 hr into Fri close and no follow-thru today.
> MCD: 3% move down in 1 hr into Fri close and no follow-thru today.
>
> All of the above typically have gap openings on the day after.
>
> See this long enough, and one learns to pick out the craziness.
>
> No, this may or may not be options expiration or SPX rebalancing related.
>
> Here's another example from last week, mid-week:
>
> On 6/13, GLW
> closed @ 16:01 NYSE @ 243.00
> traded @ 16:03-16:07 on various other exchanges @ 241-243.
> traded @ 17:03 on nasd @ 248 and 249 on 600 shares.
>
> Total volume for 6/13 was 4.3 million shares, with a volume weighted average
> price of 236 (ie bulk of volume traded at 236).
>
> 2 trades, one with 500 shares and 1 with 100 shares pushed the stock up 6
> bucks from NYSE close.
>
> Those were the last trades as recorded on the consolidated reporting system.
> In the attached gif, look for the action around index reading # 13.
>
> Next AM, GLW opened NYSE @ 241.75, down 7.25.
>
> It took 4.3 million shares to move stock up $13 from the 6/12 close.
> It then took 600 shares to move it up another $6.
>
> If this ain't tape painting, I don't know what is.
>
> I don't know who crossed those trades of 600 shares. But that became the
> official closing price for that date. Looks like 600 shares made 50% more
> money than the rest of the world made that day on GLW. Could you and I get
> filled $6 above NYSE close? Nope. No exchange would cross it.
>
> A-ha! Now we have sweetheart prints appearing....
>
> Pull up a daily chart of GLW. See if the 6/13 bar qualifies as the
> ""follow-thru confirmation of a cup and handle breakout pattern at new
> lifetime highs on double average volume".
>
> GLW of course is now "consolidating".
>
> As Jeff Cooper's father likes to say, stocks don't move. They ARE MOVED.
>
> Gitanshu
>
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