Pulling and Stacking

Pulling and stacking is when limit orders are either added to or removed from the book. More sellers stacked on the offer can push price down; more buyers stacked on the bid can push it up.

Let’s watch how it plays out on the DOM. Press play below.

In this example, we have columns showing the pulling and stacking.

The negative numbers to the left of the bids show pulls. It happens fast but we don’t need to see the exact numbers to get an idea of what happened. We had roughly 18 contracts at each bid limit, but far fewer market orders pushed the price down (4, 3, 6, 7, 10, 5).

Look at the offers now as well - lots of positive numbers in the column to the right, we have a lot of limits added to the book almost 25 at each price. This is greater than average liquidity.

Buyers appear weak.

We skip ahead 1 minute below. Look at how many more contracts have traded at these lower prices. Way more than the visible limits. We have some stronger buying down here, but look at 64.22 - 74 buys into the offer - that is even stronger, hidden selling (absorption).

Press play - it previously appeared sellers stronger than buyers, and we have been proven correct, with the price dropping some more.

Absorption

This behavior is simply when a limit keeps stacking or filling at a price level. Press play and watch the behavior below. Most of the time this is caused by iceberg orders, hidden orders that exist at the back of the queue (albeit these orders also have a display quantity, which get triggered at their respective queue location).

This behavior can typically be found at support and resistance levels… and anywhere in between. Most execution algos are liquidity seeking. While this could possibly indicate a reversal - it could also just be happy traders. Price loves returning to volume.

This behavior analyzed on its own lacks any directional bias, however given context it can.