We have been talking on our morning show about the earnings news algorithm.  A lot of HFT firms run news algorithms to take advantage of news events, and to pick-off standing limit orders.  But some firm is running their news algorithm very aggressively this earnings season, and it appears to be getting burned in the process.  We’ve watched this earnings news algo get burned in a number of stocks including Microsoft, Netflix, and now Visa.

Check out today’s tape from Visa:

(Note the ticker tape reads from the bottom-up)

Earnings are released on Visa at 16:05:46, and the news algo goes to work.  It reads the news as positive, and sweeps the book (taking out all the liquidity) up to 128.20, including an aggressive purchase of 9,358 shares at 128.00.  9 seconds later the stock starts trading down over two points from that 128.20 high.

If you add up all the purchases above 127.99, it appears that this algo bought more than 16,000 shares near the top.  If that is the case, this algo is down more than $50K, as Visa is currently trading at 124.50 (at the time of publication).  Maybe this algorithm is making money on other earnings sweeps and it can afford to lose $50K here and there, but that is a lot of coin to just throw away.

In any case, take note if you’re trading a stock after an earnings release because there is some big boys pushing the prices around.