I think position building is certainly going on, if you have access to market depth you will see that there is large support on the bid side.. Was around 600k volume at 12.5 today alone, ready in case the price dropped.. This did not occur so some of these investors (due to the time stamps perhaps just one) purchased at market price at the end of day (was in last couple of minutes) this is why the 13.5 got taken out. I expect the reason because of this is because people don�t want to get caught out if there is the drilling announcement news released pre-market open the next day.
With the bidders waiting to buy on weakness they are participating in a classic example of �game theory�� It only takes low volume (possibly one buyer) to take out the offered volume on the ask (as we saw at close today) and then the rest of the position builders have to decide on whether they continue to wait for a sell or pay the 14 ask before the next bidder moves before them. Their best case is if no one gives in, but we both know that�s not going to happen. The other important thing to note is that the spread is not increasing, rather the bids move up pretty quickly to ensure they are first in line in case someone does sell�
The low level of free shares on issue will ensure that AXT will move quickly once the announcement is released and the �position builders� will be forced to all buy at market if they still want a position. The small volumes on the ask will be taken out quickly and we should see a decent rise, there is no reason why it won�t at least rival last Friday�s move. As I posted yesterday, there is no reason why AXT cannot rise to 40c and above levels on anticipation as nothing has changed (apart from a small dilution) from when it was previously at those levels..
Will certainly be an interesting few weeks�
AXT Price at posting:
13.5¢ Sentiment: None Disclosure: Held
