An analyst has drawn a parallel between options trading and American football, noting that specific sequences in stock pricing can make certain outcomes more likely, similar to how a chosen offensive formation structurally leans play toward a particular route.
As a basic example, if the offense lines up in a shotgun formation late in the fourth quarter while behind, the next play is likely a pass. If the defense reads these clues, it could jump the route for an interception.
The same philosophy applies to financial markets, the analyst stated. When a security has suffered extended selling pressure, new information is often needed to justify further downturns. Without it, beaten-down securities may find it harder to continue falling and could be ripe for a reversal.
The stock market operates by the Markov property, where the future state depends only on the current state. Three stocks discussed have been beaten up in recent weeks and may respond differently than if they had enjoyed a series of upswings.
The thesis is that due to market downgrades, these securities may reflexively bounce higher from increased value perception. The approach uses empirical data to guide trading decisions rather than narrative.
Hewlett Packard Enterprise (HPE) has lost roughly 8% to start the new year. HPE stock carries a Weak Buy rating from the Barchart Technical Opinion indicator. In the long run, Hewlett Packard should benefit from its infrastructural specialties, with AI being a compelling growth area.
From a hierarchical perspective, a random 10-week position in HPE would likely land between $22.15 and $22.50, assuming a spot price of $22.17. Probability density would peak between $22.25 and $22.31 over many trials.
The focus is on the statistical response to the current quantitative setup. In the last 10 weeks, HPE printed only four up weeks, leading to an overall downward slope. Under this 4-6-D sequence, forward 10-week returns would likely range between $21.50 and $23.50.
Probability density would likely peak at $22.35. Most probability mass clusters north of the spot price, making HPE an intriguing idea for a controlled vertical spread.
Referencing trading data from Barchart Premier, the analyst is looking at the 22/23 bull call spread expiring Feb. 20, 2026. If HPE stock rises through the second-leg strike, the maximum payout would be 96%. Breakeven is at $22.51.
Snowflake (SNOW) has gained nearly 35% over the past 52 weeks. However, recent performances have been lackluster, gaining just over 2% in the past six months and down about 1% to start this year. The cloud-based data platform company should see its fortunes turn thanks to its relevant business.
From a hierarchical lens, SNOW's forward 10-week returns would likely range between $217 and $226, assuming a spot price of $219.09. Probability density would likely peak at around $222 over many trials, showing a modestly positive bias.
The analysis focuses on SNOW's response to the current quant signal. SNOW is in a 4-6-D formation, which would typically lead to forward 10-week outcomes between $205 and $245. Probability density would likely peak at around $228.
The penalty in probability decay is limited between $225 and $230, where density will likely only decline by 8.66%. But between $230 and $235, this metric would fall to over 62%. From an opportunity cost perspective, the analyst likes the 220/230 bull spread expiring Feb. 20.
If fully triggered, max payout stands at almost 125%. Breakeven is at $224.45.
CrowdStrike (CRWD) is down half-a-percent to start the new year. In the trailing month, CRWD stock fell more than 9%, reflecting concerns in the cybersecurity space. Despite volatility, the fundamentals offer significant relevance. While generative AI improves productivity, it can also be used for nefarious purposes like data breaches.
It's difficult to see downturns in CRWD stock as anything other than an eventual upside opportunity. From a hierarchical perspective, CRWD's forward 10-week returns would typically land between $450 and $550, assuming a spot price of $470.61. Probability density would likely peak at $500.
The focus is strictly on the current quant signal, which is in a 4-6-D formation. Under this setup, the stock's forward returns would likely range between $430 and $570, with probability density likely predominant at $520.
Probability decay accelerates sharply beyond $520, allowing exposure to be capped with a vertical spread. The analyst is looking at the 510/520 bull spread expiring Feb. 20. Max payout lands at over 292%, with breakeven at $512.55.
On the date of publication, Josh Enomodo did not have positions in any securities mentioned. All information is solely for informational purposes.