Sentiment Reversal: Using the Playmaker to Uncover Highly Probabilistic Ideas

With over 500 securities that are tradable via weekly options, it's important for market participants to focus on the ideas that feature the highest empirical odds for success. Such an approach requires statistical analysis, which on the surface sounds easy enough: merely take the desired outcome divided by the total number of events in the underlying dataset.

However, the above formula only calculates a derivative probability; that is, the probability of an outcome materializing over the entire distribution of the dataset. What most traders are looking for is the conditional probability or the chances of an outcome transpiring from a specific subset of the data.

To use a baseball analogy, derivative probabilities are similar to the batting average over an entire season. Conditional probabilities are akin to situational averages, such as when there are runners in scoring position (RISP).

But to calculate conditional probabilities requires that the measurement metric of the dataset speak a unified language. That's a key reason why the Playmaker model converts price action into market breadth — sequences of accumulative and distributive sessions. Market breadth is effectively binary and as such can be easily categorized and quantified for the end goal of enabling proper statistical analysis.

With the framework laid out, for the business week beginning June 23, I want to put the spotlight on stocks with weekly options that have incurred a negative trajectory in the last 10 weeks but are statistically poised for upside relative to their baseline probabilities.

Below is a list of 22 stocks to watch this week:

Ticker	L10 Category	Sample Size	Up Probability	Baseline Probability	Median Return if Up
UNH	3-7-D	16	68.75%	55.94%	2.09%
JNJ	6-4-D	30	66.67%	54.11%	1.33%
TMO	3-7-D	36	66.67%	53.93%	3.36%
ACN	6-4-D	42	64.29%	59.96%	2.67%
MCD	3-7-D	25	64.00%	57.77%	1.87%
REGN	6-4-D	25	64.00%	50.82%	2.78%
TJX	4-6-D	55	63.64%	54.11%	2.28%
PG	4-6-D	57	63.16%	54.48%	1.67%
STZ	3-7-D	38	63.16%	51.74%	1.33%
TMUS	4-6-D	50	62.00%	57.04%	2.48%
CI	3-7-D	42	61.90%	53.75%	2.14%
GTLB	3-7-D	21	61.90%	48.19%	7.04%
GDDY	4-6-D	44	61.36%	57.12%	2.06%
VALE	3-7-D	43	60.47%	49.91%	2.79%
FI	4-6-D	48	60.42%	58.14%	1.95%
CLOV	2-8-D	20	60.00%	43.35%	10.01%
HD	6-4-D	29	58.62%	55.39%	2.94%
PEP	3-7-D	36	58.33%	53.38%	1.63%
BIDU	3-7-D	69	57.97%	48.08%	3.77%
DPZ	4-6-D	57	57.89%	52.83%	2.68%
HUM	4-6-D	71	57.75%	54.48%	3.15%
ABR	3-7-D	28	57.14%	51.01%	4.00%