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ZIOPHARM Oncology, Inc. Message Board

  • gere33982 gere33982 Apr 7, 2011 11:08 AM Flag

    As I suggested yesterday...

    .. we gapped up this morning, peaked, and now are probably retracing to fill the gaps.

    The volume control looked like it was broken with $1.2 million traded in the first 30 minutes, probably due to momentum investors boarding the ZIOP express with market orders,but now the money flow has gone negative and the gap is filling.

    This is actually an incredibly predictable pattern with stocks.

    A stock has a good day and good technicals, momentum investors jump in with overnight orders, so to get enough shares to fill the orders market makers have to gap up to get shares from owners who have profited the previous day, or left stop limit and limit orders.

    The required number of shares are thus collected and sold at market to their new owners, then once the demand has dried up the price is dropped to where trading left off the day before so that the market makers can accumulate more shares for resale later.

    A trailing stop placed yesterday would have taken advantage of this phenomenon, however I went a different path and with the stock at $6.60 this morning sold July $7 calls for 65 cents a share, locking in a nice profit if the stock goes up more, but not over $7.25.

    Of course the price may go higher, but I have have an equal number of shares that aren't pledged to option calls.

    If the stock plunges below $6.10 I will probably buy back those calls on the cheap and sell $6 calls instead.

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