Understanding the statistical significance of our deviation thresholds.
The foundation of our analysis. We calculate the simple moving average over 200 trading days:
This creates our baseline for measuring statistical deviations.
We measure how far the current price deviates from its 200-day average:
This percentage forms the basis for our percentile analysis.
Our extreme thresholds correspond to statistically significant percentiles:
In a normal distribution, ~68% of values fall within ยฑ1ฯ, meaning only 32% of observations are "extreme" (16% below, 16% above).
The 16th and 84th percentiles represent statistically significant deviations:
When a stock hits these levels, it's experiencing a rare event that occurs only ~16% of the time historically.
Why 1-Sigma? One standard deviation captures meaningful but not extreme outliers. It's frequent enough to be actionable (~16% of the time) but rare enough to be statistically significant.