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A stock drops 8% in a matter of minutes on very low volume (seems to indicate selling to the lowest bidder, ie buyer controls price). Now the bid price is higher than the last trade for quite some time without any trades going through (seems to indicate that the seller is in control of the price).

Is there something fishy about this? Such a large plummet followed by the the ask dictating the price movement seems like something that wouldn't happen naturally.

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    Wouldn't this happen if a few people quickly sold off a large amount of stock? – Nate Eldredge May 18 '15 at 18:01
  • That has happened recently with this same stock but each time it recovered very quickly. I also considered that a lot of shares were shorted but the volume it happened on wasn't really anything special. – nick May 18 '15 at 19:59
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    It just sounds like a very illiquid stock. Best to stay away from it and look for something else with more liquidity (higher volume and smaller range between bids and asks). – Victor May 18 '15 at 21:51
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It doesn't sound fishy at all to me. Just seems like you may be dealing with a company that has relatively light trading volume to begin with, meaning that small trades could easily make the price drop 8% (which isn't much if you're talking about a stocks in the $5 or less range. If someone sells at the bid and the bid happens to be 8% lower than the current price, that bid is now the price, hence the drop. The bid moving up afterward, just means that someone is now willing to place a higher order than what the last trade was, to try to get in.

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You have to look at stocks just like you would look at smaller and more illiquid markets.

Stock trade in auction markets.

These are analogous to ebay or craigslist, just with more transparency and liquidity. There is no guarantee that a market will form for a particular stock, or that it will sustain.

When a stock sells off, and there are no bids left, that means all of the existing bidder's limit orders got filled because someone sold at those prices.

There is nothing fishy about that.

It is likely that someone else wants to sell even more, but couldn't find any more bidders. If you put a bid you would likely get filled by the shareholder with a massive position looking for liquidity.

You could also buy at the ask.

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