Which Stocks Have the Highest and Lowest ATR?

Jul 25, 2008: 11:46 PM CST

Knowing the Average True Range (ATR) value of a stock for a given period can be immensely helpful for you in developing trading candidates and risk-management strategies.  What are the Top Ten and Bottom Ten ATR values for stocks in the S&P 500 Index?

The Average True Range Indicator tells us the ‘average’ price movement of the last 14 days (default), which lets us know the range to expect, and also gives us a measure of volatility.  Volatility can equal risk for traders, but it can also signal plenty of opportunity for day-traders.

Let’s look at the 14 period daily ATR values (data created and sorted with TradeStation’s RadarScreen):

Top Ten ATR Values:

Before I conducted this quick test/scan, I expected Google (GOOG) to top out the stocks for the most volatilite (or have the largest daily range).  I was wrong; in fact, Chicago Mercantile Exchange (CME) topped Google by almost $4.00 per day!

My next thought was that Apple would be in the Top 5, but actually, AAPL barely squeaked into the Top 10 list, trailing Goldman Sachs (GS), Mastercard (MC) and the Washington Post (WPO – did you know it traded aboe $600 per share?).

Folks, if you are eager equity day-traders, here is your top-ten ‘scalping’ list.  Capturing a $1 move with 1,000 shares (considered a ‘plunge’ position) will net you – surprise – $1,000.  That may be a lofty goal to reach, but meeting it could be easier if you play the swings in these stocks.

What stocks should day-traders absolutely avoid?

Bottom Ten ATR Values:

To be fair, I did not filter out stocks priced beneath $20 – doing so would have wiped away almost all of these stocks.

Another bonus tidbit of information is that 109 stocks in the S&P 500 Index currently trade less than $20 per share (that’s 22% of the total index).

Only 16 stocks (a mere 3%) trade greater than $100 per share (based on a closing price of July 25, 2008).

Thus, roughly 75% of all S&P stocks are between $20 and $100.

The Average True Range indicator can be useful in determining trading candidates, determining stop-loss levels (usually a function of the ATR, such as place a stop two times the value of the current ATR), determining profit targets (also a function of the ATR), or assessing volatility and range expansion.

10 Comments

10 Responses to “Which Stocks Have the Highest and Lowest ATR?”

  1. Steve Geringer Says:

    Hi Corey,

    I really enjoy reading your blog and market commentary.

    Unfortunately the ATR is not quite as useful as it looks. In practice, volatility as a percentage of price is more useful. Taken from your examples, UIS moves more on a percentage basis (9.2%) than than the CME (6.9%).

    Try this code: ATRPercent=(ATR(10)/EMA(Close,10))*100;

    Another reason percentage moves are more useful than absolute moves is due to position sizing. Would you really choose between 1000 shares of CME or 1000 shares of UIS ?

    Thanks and keep up the good work !

    Steve

  2. Options Trading Beginner Says:

    Hi Corey,

    Thanks a lot for the post.

    Never fail to always learn new things from you. 🙂

    I’m really interested to learn & find out more about the use of ATR, e.g. how to use ATR to help determine trading candidates or profit targets.
    So, will be looking forward to your future post about that, if you plan to do so.

    Thanks again. 🙂

    Best Regards,

    Options Trading Beginner

  3. Corey Rosenbloom Says:

    Steve,

    Thank you for the comment and for the formula.

    I see your point and apologize for missing this concept in the discussion. I’ve programmed the formula into TradeStation and will be releasing a new post to detail the top and bottom 10 ranking of percentage of ATR to closing price (will also try the EMA method as well). So far, the results look excellent and it has opened my eyes to a new measure of volatility. Right now, I see that Freddie Mac has the highest percentage at 34% (the close was $8.10 and the ATR (14 days) is $2.77). You’re right – although CME has the highest ATR value, it actually comes in #84 in terms of ATR percentage of price (at 6.94%).

    Excellent contribution – I will give you credit in the upcoming post.

  4. Corey Rosenbloom Says:

    OTB,

    Thank you for the comment!

    As mentioned here, I will be crafting a new post regarding ATR as a percentage of closing price, which will shed some new light and accuracy on volatility.

    Thank you for reading and for the comment.

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