On 15th Feb 2019, Dr. Reddy February futures tumbled as much as 30% percent, as the U.S. drug regulator reiterated issues regarding manufacturing standards at its plant in Bachupally, Telangana which accounts for 40-45% of the Dr-Reddy’s US market sales.
Before Getting into how liquidity crisis happened in DR Reddy. Lets get to know what is actually liquidity crisis.
The order book is very liquid when a great amount of orders is stored in each side of the order book (Limit Buy orders and Limit Sell Orders) and almost all quotes behind the bestSource : ResearchGate
oneare occupied. In such a situation a market order produces a small perturbation of the system and then a small price adjustment. On the contrarywhen a liquidity crisis occurs ,the order book is characterized by few orders stored and by a large average gap between adjacent orders. In this caseeven a market order with a small volume can produce a dramatic price fluctuation of several ticks
DR Reddy 5min Charts
And 20 seconds of time is all it got for
Below is the 5-second candlestick charts of how to crash looks like before recovery.
During those 20
DR Reddy 5 second Candlestick charts
When price is travelling in a low liquidity zones 112 lots is what required to push the price from 2300 levels to sub 1900 levels.
DR Reddy 5 second Orderflow Charts
Buyers and Sellers Transaction Blocks – 5 second Interval