The accuracy of last week's block data for the market in general and Take-Two Interactive (NASDAQ:TTWO) in particular was questionable. This is especially true concerning the data of May 15. Somehow the data has since corrected itself and we will run another download tonight to confirm that all is as it should be.
For example: Somehow a block of 3,148,286 shares traded at $45.55 after the close. The split in 2005 not withstanding,Take-Two Interactive has never been near those levels.
Unfortunately, I do not know anyone who is reporting these anomalies except me. We were seeing trades from exchanges that do not exist and at prices that were completely erroneous. The provided example speaks for itself. Enough said about that.
If you review the chart in Figure 2.3 you can see that the vertical lines index with points of reference the most significant blocks in this issue.
I am going to use an excerpt from my book "The Stock Market Insiders Manifesto" to illustrate that what occurred in MBIA Inc. (NYSE:MBI) in 2010 is what I suspect is happening with Take-Two Interactive currently.
The following is a 2010 chart of MBIA Inc. (Figure 2.1) and a block matrix (Figure 2.2) of the significant trades. An advance off of the lows was initiated by a large block, followed by adding to the position with another block, then distributing the position and finally shorting the issue prior to the decline.
FIGURE 2.1 (Chart courtesy of eSignal, Copyright 2010)
MBI - MBIA INC Block Activity
The 10 Million share block on December 18, 2009 is extraordinarily large for MBIA Inc.. This is obviously the establishment of a long term position by an insider. The next block on January 12th would seem to be the same insider adding to his position or possibly selling part of his position to another insider. Quite frankly, I am not interested in the intrigue, just the blocks and the consequences which must follow. The block on April 16th is most likely a partial liquidation of the 10 million shares purchased on December 18th and I suspect the rest was distributed in smaller blocks over the subsequent weeks.
It is important to understand that the Designated Market Maker on this type of trade liquidates out of positions within the early stages of the broadening top formation. They do not want to tie up their capital for any longer than necessary, particularly if the issue is going absolutely nowhere. They want to put their money to work elsewhere.
In addition, the 4 million share block on May 5th is most likely a short sale at the end of the top. As previously stated the Designated Market Maker (DMM) never misses an opportunity to profit anywhere in the merchandising cycle.
MBIA Inc. is an interesting example because it flies in the face of fundamental analysis. At the time they were awash in unknown liabilities for their collateralized loan obligations."
I believe that the blocks in Take-Two Interactive that transacted on February 9, were the same from the standpoint of function as the blocks in MBIA Inc., which traded on April 16, 2010. I further believe that the block on May 5, 2010 in MBIA Inc. was a short and is similar to the blocks of Take-Two Interactive, which traded on February 27, 2012, March 23, 2012, April 5, 2012 and April 16, 2012.
I believe the block on May 16, 2012 was the cover on the short position. I do not see this as a short squeeze. I simply believe the Designated Market Maker has covered his short position and accumulated and will begin a short-term advance from these levels.
On the basis of the foregoing these are my views and observations:
I recommend establishing a long position in Take-Two Interactive. Open your position with only ¼ of whatever capital you intend to commit to Take-Two Interactive at $11.13. Purchase the remaining ¾ of the position at $10.24 and stop out at $9.82.
Do not post your stop out. I have said it before but it is so important that at the risk of being redundant I will say it again. It is too easy for the Designated Market Maker to cash investors out by moving the price below your stop out and move the price right back up again.
In addition, when a stop out is triggered it converts into a market order and that could be disastrous if the Designated Market Maker decides to really take advantage. Remember the "Flash Crash"? I would be looking to exit the trade at an upside target of $12.49. Do not allow this position to exceed 5% of your overall portfolio.
This is a trade not an investment.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TTWO over the next 72 hours.