Trading Analysis - 22nd Oct 2018


22 October 2018

10:25 AM

Strong buying from the start yet again. The excess of Buys was only exacerbated following the rather ill-advised drop in the price level around 9:45  - this generated a significant increasing in buying pressure which resulted in a nett excess of >700K Buys over sells and then subsequently (marked in green) another 750K shares being forced to be taken from the MMs magic share pot (presumably First Island) in the same manner in which they were taken during the closing of the post-strike short position.

Following the 'double-up' last week the 5M short position now has an average sell price of shares of an estimated 28.30p. If the MM that has been selling all these shares this morning is the one with the short then they will have just had to shell out 28.50p to get those shares, and they have not been able to reduce their short position by a single share yet.

I fully expect the short MM to try all sorts of games and shakes in the next few days to try and force the price below 28.00p so that they can score yet more shares from First Island and close their short without losing money. Now that their position is essentially public knowledge they had better hope that nobody spots this and chooses to subject them to a short squeeze. The people who are really in the best position to do this are of course First Island - not only would they make an estimated 2-3p more on the 5M shares that they might dispose of (worth £100,000-£150,000) but by showing a little more patience they could also allow the value of their remaining 25 Million+ shares to increase by an estimated  2p - 10p - that is between £0.5 Million and £2.5 Million.

End of Day

The early phase, terminated by the 750K sell at 10:23 is clearly visible in the chart above. Subsequent delayed trade reports and comparison with the ADVFN trade logs reveal a triplicate structure of this terminating trade. Let us dig deeper into this complexity.

On ADVFN two precisely duplicated 750K trades at 28.50p are reported at 10:23:35 whilst another single 750K trade at 28.60p is reported some 21 seconds earlier at 10:23:14. On only a single trade is shown at both timestamps. The comparison with the second triplicate observed later in the day suggests that will catch up with ADFVN at some point.

What would appear to be the simplest explanation is that a single block of 750K shares was introduced into the market to balance the almost precise 750K quantity of shares sold this morning. The precise fumbling around with shares that yields the triplicate structure we perhaps do not need to bother ourselves with but in conclusion it also seems reasonable to assume that these shares have ended up with the Market Maker that has been playing the 5M short game. Thus 750K from First Island going to Mr Market Maker with the short that is starting to hurt, and probably via two intermediaries. All this makes arms trading look simple.

Later in the day, just after the close of trading, we see the exact same pattern - ADVFN (and this time) show two duplicated 250K trades at 28.50p preceded, 8 seconds earlier, by another 250K trade at 28.60p - again we interpret this as 250K from First Island eventually ending up in the pockets of the short MM.

In conclusion we therefore have strong trade data to support the hypothesis that 1M shares have been taken from First Island and have been used to partially close the 5M short estimated at the end of last week.

However, the end day trade position shows c. 750K more Sells than Buys - it would appear that this should only reduce the overall Market Makers' short position of 0.75M and not the 1M we suspect from the individual trade data. Such a situation would be obtained if MM(short1) reduced their short exposure from 5M to 4M, whilst MM(short2) increased theirs from zero to 0.25M.

he 250K imbalance may be taken up tomorrow, but if it is not and we see the same disagreement between individual trade data and nett share flows then we may suspect that we are observing a short being closed by one market maker but taken over by a second one.

The chart above continues to show the overall Market Maker exposure, which can be derived unambiguously and is around 4.35M shares at present.


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