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Quant Signals Point to High-Probability Trades in UNH, CVX and SOUN This Week![]() In the film “Enemy at the Gates,” an early scene set in the midst of the Battle of Stalingrad shows the classic Soviet meatgrinder attack: essentially, it’s an attempt to overrun enemy positions with massive scale, irrespective of the cost. Because this brute Russian logic applies throughout the underlying society, it’s a human rights catastrophe. But applied to data? The statistical implications are impregnable and that’s the beauty of the Playmaker forecasting model I’ve been using over the past month-and-a-half period. Fundamentally, the discipline of trading — specifically options trading — focuses on probabilities. Because the framework is short term and defined, the emphasis is less on the “why” of a particular asset or security and more on the “how”: how much, how fast and, most importantly, how likely. Generally, there are two ways of approaching the probabilistic dilemma. The standard American or western approach is to attempt to find signals and patterns in the continuous scalar signal that is the share price. Here, stochastic calculus and partial derivatives are deployed to estimate future price ranges. However, with the advent of artificial intelligence, analysts no longer need to estimate probabilities; they can directly count the datapoints in brute fashion at blistering scale and speed. But in order to make data comparisons across vast ranges of time, it’s important to compress this demand profile into its most elemental, binary form. And that’s what the Playmaker does, count tens of thousands of market breadth datapoints — or sequences of accumulation and distribution — to identify highly probabilistic trades. I’m not here to tell you why I think these stocks may move higher. Frankly, that’s irrelevant. No, I’m letting the data guide the discourse. Below are three stocks to put on your watchlist for the coming week. UnitedHealth (UNH)Let’s start with a controversial idea in the form of UnitedHealth (UNH). The healthcare giant has just about hit every branch of the ugly tree. You don’t need me to rehash the same tired narratives. What you might not be aware of is that from a market breadth perspective, UNH stock may be signaling a reversal pattern. In the past two months, UNH stock has printed a “4-6-D” sequence: four up weeks, six down weeks, with a net negative trajectory across the 10-week period. In 66% of cases, the following week’s price action results in upside, with a median return of 2.88%. Should the 4-6-D sequence pan out as projected, UNH stock could potentially reach over $310 within a week or two. What makes this setup so intriguing is that, as a baseline, the chance that a long position will be profitable over any given week is only 54.49%. Therefore, the 4-6-D shifts the odds firmly in favor of the bullish speculator. With the above market intelligence in mind, I’m looking at the 305/310 bull call spread expiring June 20. This transaction involves buying the $305 call and simultaneously selling the $310 call, for a net debit paid of $260. Should UNH stock rise through the short strike price at expiration, the maximum reward is $240, or a payout of over 92%. Chevron (CVX)Thanks to widescale societal changes combined with economic challenges, circumstances have not been favorable for the oil industry. Since the start of the year, supermajor Chevron (CVX) has struggled for traction, with CVX stock losing almost 6%. For context, the benchmark S&P 500 — which isn’t exactly storming up the charts — is up half-a-percent. Still, market breadth data provides a different impression of the hydrocarbon juggernaut. In the past two months, CVX stock printed a 3-7-D sequence: three up weeks, seven down weeks, with a net negative trajectory across the 10-week period. Notably, this relatively rare pattern generates a 70.27% probability that the following week’s price action will rise, with a median return of 2.6%. On Friday, CVX stock closed at $136.70. If the implications of the 3-7-D pan out predictably, it may soon reach over $140. Now, Chevron exemplifies why a Barchart Premier membership is worth its weight in gold. With Premier access, traders can drill down the available bull spreads for the June 20 expiration date. Specifically, the 138/140 bull spread is enticing because $140 is a legitimately rational target and the payout is robust at over 104%. In my opinion, the aforementioned spread is favorably mispriced. SoundHound AI (SOUN)I don’t mean to rehash an idea that I already discussed just a few weeks ago. Still, SoundHound AI (SOUN) is awfully intriguing because of its relatively low share price and high popularity among retail traders. This presents on occasion a favorably combustible mix that, if timed correctly, could generate significant gains in a short period. A few weeks ago, I mentioned that SOUN stock had printed a 3-7-D sequence: three up weeks, seven down weeks, with a net negative trajectory across the 10-week period. At the time, I mentioned that the pattern generated a 58.33% probability that the following week’s price action will result in upside, with a median return of 13.58%. This time around, we’re back at a similar juncture with a 3-7 sequence. However, the twist is that the 10-week period has resulted in a positive trajectory. The “U” iteration of the 3-7 has materialized only six times since SoundHound’s public market debut. And in all six cases, the following week’s price action swung higher, with a median return of 15.08%. Generally, I take 100% success ratios with a huge grain of salt. Still, the 3-7 sequence, whether of the up or down variety, ultimately favors the bulls. If you’re willing to play the numbers game, the 10/11 bull call spread expiring June 20 is awfully tempting. On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here. |
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