Introducing the 10 Gappiest Stocks in the SP500

Aug 12, 2014: 2:28 PM CST

What’s a “gappy” stock and once we figure that out, which stocks are the ten most “gappy” stocks currently in the S&P 500 index?

Let’s get to work and uncover these mysteries!

First, on with the list:

I’m defining a “gappy” stock as one with a greater tendency to gap, or more specifically, a large 21 day average opening gap.

In other words, which stocks have been gapping the most, or have the largest 21 day average opening gap?

From the chart above, it should be no surprise that the ten “gappiest” stocks are also some of the highest priced stocks (for example, Priceline currently trades near $1,300 per share).

Still, the average 21 day gap (change in yesterday’s close from today’s open) is just over $5.00 for Priceline and near $5.00 for Chipotle Mexican Grill (CMG).

Intuitive Surgical ISRG – also a high-priced stock currently over $450 per share – has a 21 day average gap of over $4.50 per share.

With that in mind, let’s take a quick look at two stocks to compare “gappiness”

Despite the high share price, Priceline (PCLN) shares actually show a relatively stable degree of gappiness.

We do note that the 21 day average overnight gap (a custom indicator I created in TradeStation) does change over time and is somewhat cyclical like volatility (it rises and falls along with volatility).

Nevertheless, the 21 day average gap is stable but falling for Priceline.

Compare that to the more volatile, more “gappy” example from Intuitive Surgical (ISRG):

I added yellow highlights to the chart to emphasize the “gappiness” or visual overnight differences from one day’s close to the next day’s open.

This provides higher risk – or potentially higher reward (if you’re on the right side of the gap!) for swing traders.

My guess is that most traders would prefer stocks with less “gappiness” or at least less random overnight gap behavior.

Take a moment to review the other Top Ten Gappy Stocks in the S&P 500 which include big names such as (AMZN), Google (GOOG), and Netflix (NFLX).

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Corey Rosenbloom, CMT
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