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Author Topic: How to detect dilution on Level II  (Read 2358 times)
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Dr PennyStock
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« on: February 19, 2016, 03:45:57 PM »

One member asked me to open this topic.

I can detect dilution only looking to my streamer, but, will be interesting to know what you guys look at on level II, to detect dilution.

Feel free to respond to this topic with your opinions/experiences.
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« Reply #1 on: February 12, 2017, 01:12:34 PM »

Since I am a neophyte, my observations are limited. However, the place to start is by looking at the report filings for debt issuance, changes in share structure, and amount of remaining convertible debt. On L2, I look for the usual dilutive suspects: VFIN VNDM BMAK ARCA ASCM CDEL....etc. If a known dilutive MM is dominating the trading, volume is higher than normal, and pps is static to declining, then I assume dilution. Other signs are: Unlimited ask of 10,000 my the MM and massive bid whacks upon bid building when underlying fundamentals and technicals are ok. For me, this is most easily observable when a company releases a PR, one MM is dominating the trading, the company has convertible debt, volume spikes and share price is static. Again, these are just the observations of a neophyte.

I would be grateful to hear what your formula is for spotting dilution on L2, Doc.
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Dr PennyStock
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« Reply #2 on: February 12, 2017, 01:59:10 PM »

This is how I recognize dilution using only my streamer:

1 - Any good size bid immediately filled.

2 - Lots of trades at the ask, and, the ask drops.

3 - A 10k order on the ask, and, several trades there, sometimes over 20 or 30 trades, totalling 1M shares or more, and, the ask doesn't move.

4 - Big dumps on the bid(2M, 3M, 5M shares), sometimes using market orders, causing drops on the bid of several ticks.

5 - Trades under the bid(this one is classic). MMs see big size orders under the bid, and, sell directly to fullfil them.

6 - Big size T-trades. I already saw T-trades of about 40M shares.

7 - Finally, seeing some well known MMs permanently on the ask. The V twins, CDEL, NITE, etc, etc.

Even with only some of these signals, I know for sure that the stock is being diluted.

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« Reply #3 on: February 12, 2017, 02:17:46 PM »

This is how I recognize dilution using only my streamer:

1 - Any good size bid immediately filled.

2 - Lots of trades at the ask, and, the ask drops.

3 - A 10k order on the ask, and, several trades there, sometimes over 20 or 30 trades, totalling 1M shares or more, and, the ask doesn't move.

4 - Big dumps on the bid(2M, 3M, 5M shares), sometimes using market orders, causing drops on the bid of several ticks.

5 - Trades under the bid(this one is classic). MMs see big size orders under the bid, and, sell directly to fullfil them.

6 - Big size T-trades. I already saw T-trades of about 40M shares.

7 - Finally, seeing some well known MMs permanently on the ask. The V twins, CDEL, NITE, etc, etc.

Even with only some of these signals, I know for sure that the stock is being diluted.



I have seen everyone of those signals happen. Thanks for the signal-map to dilution. By observing these signals subsiding, it will help me determine when dilution is ending-thus signalling an entry into certain positions. A most helpful post Doc. Thank you for your generosity.
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Dr PennyStock
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« Reply #4 on: February 12, 2017, 02:44:26 PM »

This is how I recognize dilution using only my streamer:

1 - Any good size bid immediately filled.

2 - Lots of trades at the ask, and, the ask drops.

3 - A 10k order on the ask, and, several trades there, sometimes over 20 or 30 trades, totalling 1M shares or more, and, the ask doesn't move.

4 - Big dumps on the bid(2M, 3M, 5M shares), sometimes using market orders, causing drops on the bid of several ticks.

5 - Trades under the bid(this one is classic). MMs see big size orders under the bid, and, sell directly to fullfil them.

6 - Big size T-trades. I already saw T-trades of about 40M shares.

7 - Finally, seeing some well known MMs permanently on the ask. The V twins, CDEL, NITE, etc, etc.

Even with only some of these signals, I know for sure that the stock is being diluted.



I have seen everyone of those signals happen. Thanks for the signal-map to dilution. By observing these signals subsiding, it will help me determine when dilution is ending-thus signalling an entry into certain positions. A most helpful post Doc. Thank you for your generosity.

You are welcome. Glad I could help.
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Dr PennyStock
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