The Playmaker: Identifying High-Probability Ideas for Data-Driven Traders

Non-stationarity. It’s the one concept that the financial publication industry doesn’t want you to know about, particularly because most of the participants in the space aren’t even aware of the structural flaw this concept imposes.

Let’s take semiconductor giant Nvidia (NASDAQ:NVDA) as an example. Currently, NVDA stock trades for around $142. Five years ago on an adjusted basis, it traded for roughly $9. That’s a massive gulf, rendering statistical analyses — such as price clustering — nonsensical, that is, unless you believe that NVDA will once again trade in the single digits.

Subsequently, technical analysis — or the study of price trends —generally features heuristic value as opposed to empirical. But that doesn’t mean fundamental analysis is much better. Practitioners of this discipline love making heuristic statements such as “a price-earnings ratio of 15 represents good value.” However, what constitutes “good value” often fluctuates across time and sentiment regimes.

These traditional methods suffer from non-stationarity, where the metric of comparison (such as share price or earnings per share) drifts due to the passage of time, business and industry transitions and even administrative factors such as share dilution and buybacks.

In order to address the empirical fragility of technical and fundamental analysis, market participants — especially options traders — require a radical new paradigm shift. That’s what my Playmaker model seeks to deliver. Rather than chase random continuous scalar signals, the Playmaker imposes stationarity on the dataset, thus creating an apples-to-apples comparative framework.

How does the model accomplish this task? Using a mathematical process called abstraction, the Playmaker compresses all price action (over the past decade) into a binary market breadth sequence of accumulative and distributive sessions: up weeks and down weeks. Based on the balance of the last 10 weeks of market breadth, the trader can gauge the empirical probabilities of transition from one behavioral state to another.

Additionally, every stock features a baseline probability; that is, the likelihood that the security in question will rise over any given period of time. Should the current market breadth sequence feature odds that are superior to the baseline, there is an incentive to consider a debit-based strategy. In blackjack terms, you hit when the deck is hot.

To be clear, we are dealing with probabilities, not certainties. The idea isn’t that all of the prospective ideas will move as forecasted. Rather, we’re aiming for a success ratio that matches the average implied expectation that the Playmaker has revealed.

Without further ado, below are the most compelling ideas that you may consider for the business week beginning June 9.

Ticker	L10 Category (Market Breadth)	Up Probability	Baseline Probability	Median Return if Up	Trading Idea (for select tickers)
STX	9-1-U	81.82%	55.05%	2.16%
TOST	5-5-U	76.92%	53.09%	5.95%
DHI	4-6-D	72.73%	54.86%	2.26%
SYM	7-3-U	72.22%	53.15%	11.24%
EOSE	7-3-U	72.00%	43.89%	12.00%
CVX	3-7-D	70.27%	52.11%	2.60%
SNOW	8-2-U	68.75%	50.61%	2.93%	JUN'27 215/217.50 bull spread
EH	4-6-D	68.42%	47.04%	6.28%	JUL'18 17/18 bull spread
ANVS	7-3-U	66.67%	41.43%	16.68%
CMG	4-6-U	66.67%	51.56%	3.05%
JNJ	6-4-D	66.67%	54.13%	1.33%
KO	4-6-U	66.67%	54.50%	2.19%
NSC	7-3-U	66.27%	53.21%	1.37%
MPC	7-3-U	66.15%	54.31%	3.05%
UNH	4-6-D	66.00%	55.96%	2.88%
MRVL	4-6-U	65.85%	49.91%	4.62%	JUN'27 70/71 bull spread
ZS	8-2-U	65.71%	55.29%	4.26%
BSX	4-6-U	65.38%	56.70%	1.79%
MVIS	5-5-D	64.71%	44.04%	4.57%
KGC	5-5-U	64.58%	55.41%	4.42%
FUBO	7-3-U	64.29%	46.06%	10.49%
NEE	7-3-U	64.22%	57.25%	1.22%
LLY	6-4-D	64.15%	58.35%	2.64%
ACN	7-3-U	64.04%	60.18%	1.32%
PSX	5-5-D	63.24%	51.56%	3.23%
ETN	6-4-U	62.89%	56.15%	1.68%
DECK	6-4-D	62.86%	54.86%	3.04%
ABR	4-6-D	62.79%	51.19%	1.85%
NET	8-2-U	62.07%	55.00%	5.84%
CI	3-7-D	61.90%	53.76%	2.14%
CRWD	6-4-U	61.90%	55.91%	4.04%
IRM	7-3-U	61.90%	54.13%	2.21%
DXCM	7-3-U	61.54%	54.50%	3.83%
KVUE	5-5-D	61.54%	50.91%	1.94%
TLN	7-3-U	61.54%	62.26%	1.96%
U	4-6-U	61.54%	46.96%	7.79%
NOW	6-4-U	61.40%	56.33%	3.55%
HD	8-2-U	61.29%	55.60%	1.23%
CRM	6-4-U	61.21%	55.60%	2.23%
FTNT	5-5-U	61.19%	56.51%	2.56%
WDAY	7-3-U	60.76%	55.05%	2.40%
LULU	6-4-D	60.71%	55.78%	6.12%
STNE	5-5-U	60.71%	49.13%	5.71%
PANW	7-3-U	60.66%	53.58%	2.08%
GDDY	5-5-U	60.61%	57.33%	3.01%
ALGN	6-4-U	60.42%	54.68%	3.02%
CLOV	2-8-D	60.00%	43.30%	10.01%
RKT	4-6-U	60.00%	49.01%	4.73%