Trading Analysis - 8th -12th April 2019


14 April 2019

Monday the 8th of April was the start of the new financial year - hence significant ISA buying and Bed & ISA transferring was to be expected. But what actually happened - let's take a look...

Monday, 8th April 2019

The first manual Bed & ISA trade pairs were observed only 13 minutes into trading. The SP was allowed to spike up to 35.25p, from Friday's 34.0p close and was then walked down following 100K and 50K sells on either side of 10am.

A deluge of Bed & ISA's followed - more than 45 in all. On the chart the tightly bound yellow-green marker pairs fixed to the bid are the classic sign of a broker negotiated Bed & ISA pair of trades - these typically yield a 0.05p spread. ( Bed & ISA values of less than £20K achieved correspondingly larger spreads - so the broker still makes the same amount on the deal.) When these pairs fall below 30K in size (around £10K) they get represented as red-blue pairs, again fixed to the Bid on the sell part of the trade - as this is what your broker can do for you, you can see some of these around 11am.

We also see some examples of manually executed Bed & ISA pairs - typically experiencing a much wider spread of 0.3p. These all appear to arrive before 10am when the price is most volatile and may reflect a little bit too much overexuberance. Oblivious of the excess of buying the Market Makers only wish to walk this price one way  - down, but why ? 

The nett trade position finished with an estimated MM position of 464K more Buys than Sells. 

Tuesday, 9th April 2019

Tuesday started more quietly - people were not rushing in to put their £20K into an ISA, and the brokers did not appear to start processing their backlog of Bed & ISA's until around 10-to-9. The nett trade position moved positive, and both Bid and Ask prices turned up before 10am. However, a series of significant (>100K) Sells before 10:30 knocked the momentum back and both Bid and Ask prices turned down after than point. 

The nett trade position stayed roughly flat until 1:30 when a sequence of >30K Sells took the nett trade position back to neutrality. Only when the price to Buy shares fell below 33p just before 2:30pm did this position reverse as buyers returned en masse.

3x 200K sized (unusually reported without any delays) Buys after 3:25pm helped lift the days nett trading position to an excess of 655K more Buys than Sells. Another 20 or so Bed & ISA trades were observed on Tuesday, bringing the total so far for the week to 65.

Wednesday, 10th April 2019

The Bed & ISA trades continued appearing  - half a dozen before noon. The SP remained fairly strong at 33.25p - only down 0.75p from the end of the previous week (notwithstanding more than 1Million more Buys than Sells on Monday and Tuesday).

Around 2pm there was a series of 50K Sells and 100K Buys, subsequently confirmed as T20 rollovers, which correspondingly had a negligible effect on the nett trade position. However the presence of these trades may have encouraged a degree of selling or shorting activity starting around 2:40pm. At the start there were a few significant (>100K) Sells which knocked the nett trade position significantly (>300K) negative for the first time since the start of the week.

These were added to an hour or so later by regular Market manipulator Mr Round-Number with his sequence of 30K+ Sells right on the Bid.

Clearly these trades seem to act as a signal for the MMs to drop the Bid, which they duly did to 31.5p after another 30K Sell a quarter of an hour later. Then again to 31.0p following a 75K Sell 5 minutes after that. Rapid sequences of Sell trades like these, at just above the Minimum Market Size of 30K are clearly designed to get the Bid to drop, and an obvious form of Market Manipulation.

Following the drop in price buyers again returned and had absorbed approximately 250K of the 700K deficit before the end of trading. They were further assisted by yet another large trade of 500K, seemingly a Buy but as before, reported unusually, on time. This left the end day trade position only 70K down on neutrality, and with another 13 clear Bed & ISA's in the bag, bringing the total to 78.

Thursday, 11th April 2019

Thursday started quietly enough - only a single Bed & ISA before 9am, and no obvious reason in the trading balance that would explain the drop in both Bid and Ask around that point. Again Buyers responded to these bargain prices, pushing the nett trade position to an excess of 372K Buys just before the following sequence of trades around 10am.

Yes it is Mr Round-Number back again - and yet again the MMs take their cue from him - if you are a Market Maker when Mr Round-Number is in town and selling shares like there is no tomorrow you want to make sure that you are not paying any higher than you have to.

Buyers too were celebrating that he was providing them with such an opportunity, and they responded  yet again - pushing the nett trade to an excess of more than 500K Buys at noon, and more than 1M at 2pm.

Having got the Bid to briefly touch 30p the question was would Mr Round-Number return to try and breach his psychological 30p barrier? Or would someone else decide to do that work for him ? The clue is in the name - the bid only briefly returned to 31p around noon and then settled at 30.5p so our integer-obsessive stayed hidden. Instead it appears it was left to someone else to try and have a crack at the 30p barrier with some sacrificial Sells, and boy was that a costly gamble - a quarter of a million shares were sold between 1:27 and 1:50pm - but the Bid never went below 30p:-

Thus 250K shares sold at an average price of 30.376p - if it is a short then Mr Quarter-Million seems doomed to lose money.

The nett trade position moved up another 700K by the end of trading - finishing with over 1.4M more Buys than Sells. This was again helped late in the afternoon by 2x 200K Trades similar to the previous 'unusuals' already mentioned, plus another 12 clearly identified Bed & ISA pairs - that makes 90 so far this week.

Friday, 12th April 2019

Sellers tried to control the narrative soon after the start of trading, with 80K and 75K Sells before 10 minutes were out. This knocked the trade position negative for an hour or so. Possibly as a result of the inability to drive the Bid below 30p on Thursday it appears that either Mr Round-Number or Mr Quarter-Million returned to try and have another go just after 9am.

This action was somewhat undermined by the appearance of hugely outnumbering Buys in the midst of their manipulation attempt - something of a poetic irony. The nett trade position climbed to and exceeded 750K by noon. 75K and then 225K Sells between noon and 1pm did little to discourage the Bed & ISA's which continued to trundle in.

These significant sells were subsequently offset by Buys of 112K and 128K around 3pm, and the end day nett trade position finished at 460K more Buys than Sells. A further 10 clear Bed & ISA trade pairs were observed bringing the total for the week to a satisfyingly round 100 - a truly remarkable number that I have not seen on any other AIM share before.


We see many seemingly conflicting pieces of the puzzle - very significant ISA buying, (albeit of the Bed & ISA form, where the BMN shares were already owned) - strong Buying, with a nett excess of Buys over the week of 3M - and yet the SP has fallen by almost 10%. How does one explain all that ?

We need to understand the previous context first - what position were the MMs in before this week started - were they long, short or running a neutral book ? Going back to the start of April when it last seems that the MMs were running a neutral book we discover that a small-medium sized short position appeared to have been built up.

Note that this short position is entirely different to, and in addition to, the large historical short that appeared to have been built up between November 2018 and Feb 2019 following the first rise to 49p - that short is believed to still exist and is currently being rolled over until prices above 40p return. Different Market Makers of course can run their own positions so whilst the >40p short may be currently on ice, the post April-1st short may be being operated by a different market maker.

Anyway back to the apparent conundrum - why would a market maker continue to drop the SP whilst returning each day to sell more stock to PIs than they are taking in, thus increasing their short position ? That the MMs appear willing to short like this suggests a number of possibilities:-

a) They do not fear creating a larger short position, because they have a low-priced tame seller that they are fully expecting to be able to take shares from at, say 28p. Thus they sell as much as stock as they have got lined up in their version of a pre-Easter stock clearance sale.

b) They have advance notice of some bad piece of news that they are sure will give them a whole lot of stock at cheaper prices. In short they are playing the usual shorting game of trying to make money off bad news - the short position they opened during the short strike last year was of this sort. Sojitz put pay to that one.

c) They are working on the assumption that they can get other amateur shorters like Mr Round-Number and Mr Quarter-Million to continue selling stock like crazy in order to try and breach their psychological 30p threshold. This is simply the inverse to what happened when the SP hit 50p - then there appeared to be many buyers trying to chase the price up - by holding the price at 50p for some time the MMs were able to pick up lots of nice high priced Buys by PI's. In this case it would be our have-a-go shorting heroes that would be played for the fools.

d) None of the above because this is not the real situation, which is what I now believe... read on...

Going back to the unusual trades observed in the middle of this week - these are large, reported immediately, and wierdly seem to have no effect on either the Bid or Ask prices. They cannot surely be from one of us PIs. We must therefore consider that they may not be the Buys (by a suggested stake builder) that they would naively have been interpreted as. Instead we have to consider seriously the possibility that these might actually be Sells:-

The chart above shows what happens to the nett MM trade position if we interpret the unusual trades as Sells. The revised green curve shows immediately that the nett short position built up over the previous week is all but eliminated. You can also see how the cost to the MMs of picking up these blocks of shares is clearly a lot lower than the 33.0-34.50p that was obtained whilst the short position was being built up in the previous 6 trading days. The whole cycle of price reduction after the 8th April turns out to be nothing more than a handy oscillation that allows one of the Market Makers to potentially close their previously established short position. Who is having their shares sold for them at such low prices I cannot say.

So at this point is this good or bad for the Share Price - it is unmistakably good as a Market Maker with no short position has no incentive to further reduce the Share Price. 

What does this mean for those that will have taken out short positions after the 8th of April in an attempt to drive the price down and through the 30p threshold  ? - it appears that they have been read like an open book and have unwittingly done the Market Makers bidding I suspect that for them the pain is only just beginning.

This article only conveys the personal opinion of the author. Whilst every effort is made to ensure the content is accurate, we cannot guarantee the accuracy of the data shown. This article does not constitute professional, financial or investment advice and must not be used as a basis for making investment decisions.

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