TSM top-decile overnight gap-ups: intraday (open→close) fade vs. baseline over ~3 years
TSM’s biggest pre-market jumps mostly lose their steam during regular hours — but only modestly and not conclusively. We isolated the top‑decile overnight gap-ups over the last ~3 years and compared the session open→close return on those days against the everyday baseline to see whether the pre-market pop is a launchpad or an exit.
On the 74 top‑decile gap days the average open→close return was about −0.3641%, and the cross-sample statistics give a suggestive lean toward intraday selling (p ≈ 0.108) rather than a knockout result. The full minute-bar methodology, distributions, charts and robustness checks are below for the reader who wants the detailed evidence.
For TSM over the past ~3 years, do overnight gap-ups get bought or faded during the session — after the biggest gap-up opens (top-decile overnight move), is the regular-hours open-to-close return above the everyday baseline or does the day session systematically give it back? Thesis: big gap-ups get sold through the day, so open-to-close returns following top-decile overnight jumps come in below the everyday baseline and often turn negative — the pre-market pop is an exit, not a launchpad.
How this was measured
From minute bars, we isolate US regular trading hours (Mon–Fri, 09:30–16:00 ET). For each session, we take the first RTH minute's open as the session open and the last RTH minute's close as the session close. Overnight gap = open_today / close_yesterday − 1. Day-session return = close_today / open_today − 1. We rank overnight gaps and define 'top-decile gap-ups' as days with gap ≥ the 90th percentile of gap_ret. We then compare the day-session return distribution on those top-decile days against the everyday baseline (all days and the non-event 90%) and quantify the mean gap via a Welch two-sample t-test (top-decile vs other-90%). Window: 2023-07-26 to 2026-06-30 (last ~3 years subject to data availability).
The key numbers
Reading the numbers
735 sessions; top‑decile overnight gap threshold = 0.022320521232497947 (74 days). Top‑decile mean open→close = -0.003640937916782134 vs all = -7.689024649416119e-05; 58.108% of top days close down, but the difference vs the rest is not statistically clear (p=0.1081).
The charts
This histogram plots the distribution of open→close returns on the 74 top‑decile gap‑up days. The bulk of observations cluster around a slightly negative center (mean = -0.003640937916782134) with a left tail reaching about -0.0702 and a right tail to +0.0365. Look at how many bars sit below zero — 58.1% of these days close down — which shows the pre‑market pop is often given back, though there are still several positive closes.
The bar chart compares mean open→close returns: top‑decile = -0.003640937916782134, all days = -7.689024649416119e-05, other 90% = 0.0003221105516923895. The top‑decile average is a few tenths of a percent below the baselines (edge vs all ≈ -0.003564, edge vs other ≈ -0.003963), so on average big gap‑ups are faded intraday by that magnitude. Note the Welch t‑stat = -1.623 and two‑sided p = 0.1081, which means this difference isn't statistically clear at conventional thresholds.
The scatter shows every session's overnight gap (x, mean = 0.0026, range -0.1116 to 0.0844) against the same‑day open→close return (y, mean = -0.0001, range -0.0702 to 0.1316). Points are widely dispersed with no obvious upward slope: large positive overnight moves (up to 0.0844) map to both negative and positive intraday returns. That visual spread supports the idea that big premarket jumps do not reliably convert into further intraday gains and are frequently, but not always, faded.
Open→close return summary by group
| group | N | mean | median | std | fraction_negative |
|---|---|---|---|---|---|
| Top-decile gap-ups | 74 | -0.0036 | -0.002 | 0.0201 | 0.5811 |
| Other 90% | 661 | 0.0003 | 0 | 0.0185 | 0.4977 |
| All days | 735 | -0.0001 | -0.0002 | 0.0187 | 0.5061 |
The takeaway
Short answer: there is a modest intraday fade after TSM’s biggest overnight gap-ups, but the evidence is only a suggestive lean, not a knockout. On the 74 top‑decile gap-up days the average open→close return was about −0.36%, versus +0.03% for the other 90% of days, giving a top‑minus‑non-event gap of roughly −0.40%. A slim majority (58.1%) of those big‑gap days finished down intraday compared with about 49.8% on non‑events. Statistically this is not definitive: the Welch test gives p≈0.108 (about an 11% chance this pattern is sampling noise) and there are only 74 event days, so treat the result as a suggestive tendency rather than a reliable rule. Practically, the average fade is small relative to intraday dispersion (std ≈2%), so execution costs or a few outliers could wipe out the edge; use this as a cautionary signal, not a standalone trade trigger.
The fine print
- RTH open = first 09:30 ET minute open and RTH close = last pre‑16:00 minute close; these approximate auction prints and can differ by a few bps on volatile days.
- Top‑decile threshold was computed in‑sample for 2023‑07‑26→2026‑06‑30; out‑of‑sample regimes may behave differently.
- Only 74 top‑decile events — modest sample size; the Welch p=0.108 makes this a suggestive lean, not a firm signal.
- Mean edge (~−0.40%) is small versus intraday volatility (std ≈2.0%), so trading costs or a couple of outliers could erase it.