{"id":7359,"date":"2010-09-28T17:00:03","date_gmt":"2010-09-28T21:00:03","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=7359"},"modified":"2010-09-28T17:00:03","modified_gmt":"2010-09-28T21:00:03","slug":"aapl-flash-crash","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/aapl-flash-crash","title":{"rendered":"AAPL Flash Crash?"},"content":{"rendered":"

I received a couple of twitter messages about whether I was trading AAPL on the Open today.\u00a0 JoeP had mentioned in his morning thoughts blog that we were watching the 291 level closely for a possible break of the recent uptrend.\u00a0 As it turned out I was short RIMM on the Open and watching CRM as well for a break below 117 so I was unable to initiate a short in AAPL as it quickly traded below 291.<\/p>\n

Apparently “flash crash” has now become part of the trading vernacular as I have seen many tweets describing what happened in the first few minutes in AAPL as such.\u00a0 If the working definition of flash crash is a hard down move in a momentum stock that has recently run up a ton then apparently flash crashes are more common than most people realize and certainly were occurring a lot earlier than May 6th 2010.<\/p>\n

The implication when people start talking about flash crashes is that structural changes in the market are the source of these quick, vicious down moves we are seeing in today’s market.\u00a0 From my point of view these moves are no different than the sharp down moves I have seen in NASDAQ stocks for the past 15 years.\u00a0 If a rumor starts in a high flyer quite a few people are going to head for the exits at the same time.\u00a0 Especially if those circulating the rumor get the ball rolling right on the Open when the market is thinnest.<\/p>\n

I’ve attached the tick chart below from the Open in AAPL.\u00a0 The 30 second down move from 286 to 276 is indicative of price action being controlled by a sell order encountering market making programs.\u00a0 What I mean to say is that as AAPL moved down each leg 2-3 points a market making program would then step up the bid for 1 point.\u00a0 When no real buy orders materialized the market making program began to sell again causing the next down leg.<\/p>\n

I am not particularly interested in trading a stock when the bid is dropping 1 point every few seconds or so.\u00a0 That is a younger man’s futile game.\u00a0 But once the free fall is over and the reflexive bounce loses momentum I will carefully pick my spots to make a trade.\u00a0 In the case of AAPL I was interested in establishing a short after it retraced the 10 point down move.\u00a0 It began moving more sideways and was easier to define my risk.\u00a0 The tape itself actually provided a very nice entry point at the retracement high of 286.80.<\/p>\n

AAPL failed at 286.80 twice after which I placed an offer at 286.78.\u00a0 I started watching my CRM position hoping that AAPL would pop up one more time to my offer so I could get short.\u00a0 I heard Gman say that it was starting to consolidate fairly close to the 286.80 level so I cancelled my offer to get short as the pattern he was describing generally leads to a breach of resistance.\u00a0 The 286.80 level did hold one more time causing a 4 point down move before AAPL finally reversed and traded up to around 290.<\/p>\n

There are definitely structural changes that I would like to see in the US equity markets.\u00a0\u00a0 If spreads were to move to nickels instead of pennies it would encourage more participants to make markets and take on risk because of the greater rewards earned on spreads.\u00a0\u00a0 I know that I would certainly put on more risk each day.<\/p>\n

However, I don’t endorse the conventional wisdom that I have heard recently that HFT market makers are somehow worse than the NASDAQ market makers who bilked the public for billions in the 1980s and 1990s and were required to pay billions in a settlement garnered by the SEC.<\/p>\n

\"\"<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

I received a couple of twitter messages about whether I was trading AAPL on the Open today.\u00a0 JoeP had mentioned in his morning thoughts blog that we were watching the 291 level closely for a possible break of the recent uptrend.\u00a0 As it turned out I was short RIMM on the Open and watching CRM as well for a break … Read More<\/a><\/p>\n","protected":false},"author":143,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,8,15],"tags":[1377],"class_list":["post-7359","post","type-post","status-publish","format-standard","hentry","category-general-comments-2","category-steven_spencer_steves_blogs","category-trading_theory","tag-l","no-post-thumbnail"],"yoast_head":"\nAAPL Flash Crash? | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/aapl-flash-crash\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"AAPL Flash Crash? | SMB Training\" \/>\n<meta property=\"og:description\" content=\"I received a couple of twitter messages about whether I was trading AAPL on the Open today.\u00a0 JoeP had mentioned in his morning thoughts blog that we were watching the 291 level closely for a possible break of the recent uptrend.\u00a0 As it turned out I was short RIMM on the Open and watching CRM as well for a break ... 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