A trader explains how to profit from massive block trades by shorting at the open. He scans for price gaps and consolidation zones, estimates block size (25-28 million shares worth $110-120 million), then uses pre-market volume to predict a 15-20% drop when the stock opens with heavy selling pressure.
This year alone, he's had a $7 million trade, $10 million trade. Where should we begin? We go into the intraday chart. Gapped up, we consolidated for a while, dropped. So now the average consolidation price is at $5. So you want to go into maybe a 1-hour chart or a 30-minute chart to combine all those volume, the bottom. So you know, maybe at the $5 area, he traded 25 million shares. Once you know there's about 25-28 million shares traded around $5, now you use the 25 million times 5, $120 million, $110 million block. After that, you go into intraday Take a look at the pre-market volume. Let's say if it traded around 3 million, you're estimating times 10, 30 million throughout the day. But you know that there's going to be selling pressure at open and you short. So typically stock opens up and plummets 15 to 20%. Somebody are looking to long at open, they're not likely to buy. So the volume estimate will significantly reduce. 10 to 15 million shares cannot compete with the 25 million. The ratio becomes 2 to 1, and that significantly increases the bounce short winning percentage.
