If there is a current price $22.25 and the bid price is currently $19.90. That seems like a big difference. Should I be concerned if I want to buy this stock? Should I place a limit order at a price between these two? Thanks.
SLP is a low liquidity stock that trades low volume each day. During the last 20+ minutes of regular market hours yesterday, the quote was $22.20 by $22.25. A few thousand shares changed hands and price never changed.
When the market closes, people head home for the day and their orders are pulled. With fewer and fewer participants in the auction and little, if any, trading taking place, bid/ask spreads widen, sometimes even several dollars wide. So a quote like $19.90 x $22.25 during the after market implies nothing. To be sure of that, one should look at the news to see if anything of substance has been reported. In addition, one should look at pre market trading for the next morning (there is none of either today).
At 7 AM EST today, the quote was $19.75/zero with a size of 100 x 0 with no trades having taken place. One person is bidding to buy 100 shares at a crazy low price, hoping that someone in the pre-market fat fingers a bad trade. The short answer? The stock closed for trading and is waiting for new bid and ask orders to be placed.
As for placing a limit order at a price between these two prices ($19.90 and $22.25), if you want to own the stock at somewhere in that mid quote range, place your order. Chances are, the 100 share buy order at $19.75 is a PEG order with a limit price and if you place a buy order just beating it (say at $19.80), it will jump to $19.85. This will continue until you find the upper limit of the PEG order.
Is this the current bid price after market close? What is the ask price? This kind of information would help.
If these are the bid and ask prices during whilst the market is closed, I would not use either of these price points to gauge your entry point.
I would instead be using the previous days data to place my entry price. See the chart of SLP below:
SLP has been up-trending for at least the last 6 month and has dipped down on the 27th, then moved back up yesterday creating an inside bar or in candle stick charting terms - a Harami.
If you are looking to profit from further up movement in the uptrend, you are better off placing a buy stop market order to buy at $22.46, just above the high of $22.45 on the 28th. This way if the price continues moving higher you will capture and profit from the next move up. If the price instead opens lower and falls all day you will avoid buying into a stock that is clearly got more downward movement in it.
You should then work out where you should place your stop loss order. If in it for the short term maybe 10% below your entry price. If medium term maybe 15% below your entry price. And if long term maybe 20% below your entry price.