What are “buy on close orders” and why are they significant?

Buy on close orders are orders that state you want to buy a stock at the price it trades at the close. Mutual funds often buy this way, particularly index funds when they are adding to their portfolios. Tha tis why many times ou ses stocks that are being moved into a particular index run up in the last 15 minutes of trading as the buy and close orders are posted 20 minutes before the close. That can generate a significant imbalance in a stock and drive the price higher.

In a bigger sense, buy on close orders of size indicate that there are insitutions at work, ready to accumulate shares of stock. Many fund managers prefer to see where a stock is closing before taking action. If they like the action during the session and are ready to buy, the post their orders. It is useful to see insitutions making such decisions to buy (are they ready to get in?) and it also can have some carry over effect the next session. You can get this information from your borker as the orders have to be posted prior to the close.