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To be straight up, Enovix (ENVX) isn’t the easiest idea to get behind. With the Barchart Technical Opinion indicator rating ENVX stock an 8% Weak Sell, the security doesn’t exactly scream confidence. And yes, as someone who has a small position in the company, there’s going to be some personal bias to the bullish assessment. However, it’s the quantitative data that’s arguably the most convincing element here. Nevertheless, prospective investors will need to climb a wall of worries. While ENVX stock enjoys a Strong Buy consensus rating among Wall Street analysts, it doesn’t take away from the underlying risk profile. In particular, ENVX is quite volatile, losing almost 15% on a year-to-date basis. In the past five sessions, the equity slipped 22%, raising serious concerns about forward viability. One of the causes of the red ink centers on Enovix’s third-quarter earnings report. While the company delivered the goods, generating revenue of $7.99 million and posting an adjusted loss of 14 cents per share — with both figures representing an improvement against consensus expectations — guidance for Q4 was weak. Subsequently, ENVX stock sold off heavily on the disclosure. Adding to the pain, options flow data — which focuses exclusively on big block transactions likely placed by institutional investors — shows a clear negative tilt. Last week, net trade sentiment on a cumulative basis sat at $406,900 below parity. Admittedly, most of the transactions were sold calls, which are difficult to read in terms of intentionality. Still, there was a noticeable amount of debit-based puts placed against ENVX stock. What’s more, net trade sentiment on Monday landed at $29,400 below parity, providing further evidence of sustained skepticism toward Enovix. However, the ugly print may be hiding a reversion-to-the-mean opportunity. Using Probabilistic Analysis to Forge a Gameplan for ENVX Stock Following the riveting World Series matchup that we recently witnessed, I couldn’t help but be struck by the level of analytics that go into every facet of the game. Essentially, every tendency of the opponent is rigorously studied, to the point where teams have a pretty good idea of expected outcomes — and everyone adjusts accordingly. It raises an obvious question. If a children’s game is so data-intensive, why should the options market be any different? If you ask me, there should be more analytics involved because we’re talking about your hard-earned money. Instead, people are relying on fundamental and technical analysis, two methodologies that are nothing more than glorified (unfalsifiable) opinions. It’s time to change that with Russian axioms. Using the foundational work of Andrey Kolmogorov and Andrey Markov, price behavior can be treated as a discretized, measurable probability space with real outcomes and distributional probabilities. While this definition sounds complicated, what we’re really saying is that different market stimuli yield different market behaviors. For example, the odds of your fashion choice changing due to overcast weather are high as such conditions typically indicate either cold and/or rainy weather. Using Russian axioms on a dataset extending back to Enovix’s public market debut, the forward 10-week median returns of ENVX stock can be arranged as a distributional curve, with outcomes ranging between $8.72 and $9.48 (assuming an anchor price of $9.28, Monday’s close). Further, price clustering would likely be predominant at around $9.18. The above assessment represents the aggregate of all sequences since Enovix’s IPO. However, ENVX stock is currently not in a baseline or homeostatic state but is rather structured in a 4-6-D formation; that is, in the past 10 weeks, ENVX printed four up weeks, six down weeks, with an overall downward slope. Under this sequence, forward outcomes would likely range between $8.30 and $12.10. Most significantly, price clustering would be expected to occur at $10.20. That’s an 11.11% positive delta in density dynamics that technical and fundamental analysis is completely blind to. It’s not that I think these two approaches are unintelligent (although the lack of falsifiability does impugn credibility); rather, it’s that the aforementioned variance between expected and contextually realistic outcomes are present in every single stock. However, every day, all the financial publication giants write about the “5 Best Stocks to Buy Now!” without once mentioning these variances — even though they fully have the capability of doing so. Honestly, folks, it’s time you demand more from this industry — because what you don’t know is hurting you. Quants Organically Highlight Compelling Trading Ideas One of the clearest advantages of the quantitative approach is that, since you now know the probabilistic tendencies (clustering effects) of the target security, you can more easily identify intriguing trading ideas. Possibly the most aggressive play that makes sense is the 9/11 bull call spread expiring Dec. 19. This trade requires ENVX stock to rise through the second-leg strike ($11) at expiration. Granted, that’s going to be ambitious since this second leg stands near the peak of the distributional curve of the 4-6-D sequence. However, what’s really fascinating is that the breakeven price is $9.73. Based on density dynamics, this threshold is very much reachable. Now, I need to be 100% clear about something: just because a methodology uses real data science does not mean there are no risks. Over a long enough period, the best success ratio that can be expected in any methodology aimed at the stock market is about 70%. Yes, I know there are quant systems advertising 80% to 90% success ratios. Generally, these claims are cherry-picked statistics that do not hold up to independent verification. If such a system truly existed, believe me, nobody would sell it. With Russian axioms, this is about as close as you can get to black box methodologies geared toward the retail investment market. Better yet, this methodology is absolutely scalable. Let the disruption begin!
