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Around the Horn: Stocks to Watch for March 30
By Adrian Manz | Published  03/30/2006 | Stocks | Unrated
Around the Horn: Stocks to Watch for March 30

Wednesdayâ,"s trading gave us a couple minor moves in the Stocks to Watch bunch, and handed over a nice profit in a Baltimore Chop opening fade in Lear Corp.  Currently, the incarnation of the Baltimore Chop that I am using is an opening gap that is previous sessionâ,"s close ,± (2 standard deviations of true range + 10 period average true range).   The formula for the standard deviation is as follows:

Basically, what the formula says is that a standard deviation is equal to the square root of squared deviations from the average.   In other words, the question I am asking myself as a trader is â,"What excursion in price can I expect, and at what point is price likely to have moved further than what is normal for the particular security.â,   A large â,"standardâ, value indicates that I can expect a pretty substantial move with no retracement.   A smaller â,"standardâ, value indicates that prices move more tightly.

If I add the standard deviation to true range, and the opening move in a stock is at least as far from the previous sessionâ,"s high or low as that number (a gap below the low or above the high equal to low â,“ SD or High + SD) then statistically, I am 68.26% certain that price will revert into the previous sessionâ,"s range.   If the morning move is two standard deviations, then the probability of a reversion is 95.46%.  

Lear (LEA) opened with a 2SD upside gap that met my entry criteria and reversed immediately. 15 minutes later a 25 tick chart moving average cross had the trade covered with better than $1 per share to show for the effort. Other than this one, not much happened intraday on Wednesday, emphasizing once again, the importance of staying nimble and alert to the possibilities.

Lear Corp

Liz Claiborne (LIZ) still looks interesting.   The stock left a Backdoor Slider on Wednesday, and will be on my radar for Thursday.

Liz Claiborne

Lexmark (LXK) made a Fast Ball move through the bottom of its recent range Wednesday. Julie and I will be watching for a potential ,½ point downside retest on Thursday.

Lexmark International

Raytheon (RTN) had a Fast Ball range expansion on Wednesday after a seven-bar climb and pullback.   The stock looks strong going into Thursday, and we will keep an eye on it throughout the session.

Raytheon Co.

Sunrise Senior Living, Inc. (SRZ) also had a Fast Ball expansion on Wednesday. We will be watching for a pullback and reversal around 39.40 on Thursday to trigger a long entry.

Sunrise Senior Living, Inc.

Adrian Manz is the author of Around The Horn: A Trader's Guide To Consistently Scoring In The Markets and is cofounder of TraderInsight.com. Email him at adrian@traderinsight.com.