Can you please explain what takes place in the last 45 minutes that unleashes all the buying activity so often? (December 18, 2001)
Most of the action takes place in the first and last hours. Why? Usually the early hour is dominated by retail investors that put in orders the night before, and to a much greater extent institutions with buy orders that are either buying equities or selling them based on fair value in the futures. The last hour is often called the 'smart money hour.' The reason is that many are more interested to see how a stock has performed all session (pattern and volume) so that there is a better understanding of what a 'fair' price is for the stock and what the stock may do the next session. When they buy in big quantities on the NYSE, they often use buy on close orders, buying the stock at whatever the price is at the close. If they like what they see during the day, they submit these orders 20 minutes before the close and make the buy then. Your broker can scan those for you. I have often said I want to know where a stock is closing more than where it is opening. There is history there for the session, and it helps to make educated entry points. That is why when we see an early breakout sure we will take some positions, but we will also look later in the session to see how the volume is fairing and how the price action has held up. As an investor, it is good to know what the institutions are doing, and it is easier to see that on an intraday bases in the last hour.
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