meszaros

The fundamentals of RHE have not changed...

Long
AMEX:RHE   Regional Health Properties, Inc.
The fundamentals of RHE have not changed........I continue to see it as a strong MEM stock. One of the many characteristics of MEM shares is intraday liquidity. An elevated intraday trading volume should be quickly satisfied by market makers. In the event that this is not met for some reason, the price movement of the stock can suddenly take on extreme values. This is a fundamental characteristic of MEM shares. Market makers are required by their contract with the SEC to ensure market liquidity even if they run into certain constraints. What are these limits ? Not enough shares trading. What is the solution ? It has to be done. Suppose our market maker "A" receives a request to take a long position of 100,000 shares. At the opening, our market maker A has only 20,000 shares available for sale. What happens. Our market maker A starts making calls and tries to get 80,000 shares from other market makers. Market maker "B" comes forward and gives market maker "A" a contract to confirm the availability of the extra 80,000 shares at the opening of the trade. But the market maker "B" does not have 80,000 shares either. For the sake of example, let there be only 40,000. What happens next. The market maker B gives the 40,000 shares to the market maker A, but since he has agreed to confirm 80,000 shares, he goes to the market maker C and asks for confirmation of another 40,000 shares. This example could go on for hours. You have to see the point. A group of market makers can generate thousands of times the average daily turnover by certifying these round numbers. This is why a small public issue like RHE(1.7 million shares) can generate up to 40-50 million daily volume. It can be seen that it is not the trading volume of shares that is increasing, but the number of "paper certificates" behind them. Moving on. Behind the increased daily volume, there is also a true small presence of equity investors. They are not day traders. They buy shares for several months. These shares are excluded from the daily volume of publicly issued shares, leaving market makers with even fewer tradable shares. If we look at the chart, we can see that the second fractional wave although showing a similar percentage increase nearly doubled this is because the trades behind the second wave movement were now made with fewer real shares, instead the market makers used many more share certificates. These are building huge paper pyramids and by their very nature, extreme price rises and extreme price falls are to be expected. This brings us to MEM shares. In my opinion, there is nothing to fear from MEM shares, as extreme profits can be made through them, but as they have nothing to do with either corporate or economic fundamentals, they should be traded with due diligence.


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