Wednesday March 16, 2022
Context
AMZN has long been one of the most heavily weighted components of SPY and QQQ, and
is considered among the most important stocks in the entire S&P 500. However, its very
high price makes it more difficult to trade. As such, institutional blocks are less
common than those executed in similarly weighted components (AAPL, MSFT, etc.) and when they do arrive,
they tend not to be particularly large.
Leading into the day, the broad market had been in
a steady decline for over two months with frequent episodes of volatility.
The Fed also held their scheduled FOMC meeting that day, and FOMC announcements often
coincide with increased volatility. Wild swings were to be expected this day, and
that's exactly what happened.
Just before 2pm, AMZN had been trading just above $3000. At 2pm, coinciding with
the release of the Fed's meeting minutes, AMZN (and the broad market) began a steep
decline. 50 minutes later, AMZN had dropped roughly 1.5%.
Then everything changed.
At 2:51 PM, the largest trade in AMZN's history printed. 1.7M shares @ $2950 traded
on a dark pool and price immediately began to rebound. This trade amounted to $5B and was the largest
trade in AMZN's entire trading history in terms of dollars.
This visual shows more.
Trades of this size are extremely large, extremely rare, and extremely valuable in terms of identifying institutional intent.
Given how sharply price reacted to this trade, one could immediately assume it was an institutional buy.
This single trade is among the strongest, and most obvious signals to exit shorts and/or enter longs.
Almost any long trade placed in AMZN, QQQ, SPY, or any other ETF with AMZN as a heavily weighted component
would be immediately profitable if placed after this trade printed. Even mutual fund trades placed at the
end of the day would still see substantial profits if held for any part of the next seven days.
Price closed up $100 from that trade and proceeded to rally for the next eight trading days with only
brief and shallow pullbacks eventually topping $450 (15%) higher on March 29, 2022.
Detecting disproportionately large trades with context enables traders to
quantify exactly how large, how rare, and how meaningful trades are. It also helps traders identify
how much conviction and urgency come with such trades. With this information, traders can better position
themselves to trade when and how institutions trade to reduce risk and increase profits.
Before
|
After
|
|
