Why This Statistical Edge Favors CRWD, JNJ and LULU For the Coming Week

Globe and Mail

13 hours ago

A critical problem within the standard practice of market analysis is that the methodologies often beg the question: the assertions assume the conclusion within the premise. For example, it's not uncommon to hear experts talk about price-to-earnings ratios of 15 being 'good value' or a head-and-shoulders pattern being 'bad' for the target stock price.
Is the chart pattern or financial ratio a legitimate example of that which is being asserted? And if so, what is the empirical evidence that the event in question is predictive? Often, the answer is some dressed-up version of 'just because,' which then becomes a self-referential loop.
A better approach is to analyze market breadth, which is basically the sequence of accumulation and distribution. In other words, market breadth is demand and demand benefits from the beautiful quality of binarism — it's either happening or it's not.
Binary metrics are also discrete, meaning that they don't succumb to the non-stationarity problem of fundamental and technical analysis. While these latter approaches may offer heuristic insights, their relevance is incredibly fragile across vast stretches of time and sentiment regimes. That's because the metrics of comparison (such as share price) tend to drift or evolve, often quite dramatically.
In contrast, the language of demand — of buying and selling — remains the same, whether we're talking about the market in 2025 or 1925.
This discretized model — where the volatility of price action is compressed or abstracted into a binary genetic code — offers tremendous probabilistic insights. Last week, I identified three stocks using the model that signaled a higher-than-average propensity for upside.
Comparing Monday's opening price to Friday's close, all three securities moved higher. Two of them at some point in the week exceeded the short strike price of the bull call spreads I discussed as prospective ideas.
To be clear, the market is chaotic, which means losses are guaranteed to happen. My point? We have limited resources. So, with empirical data, I'd like to direct your attention to probabilistically compelling ideas.
CrowdStrike (CRWD)
Fundamentally, CrowdStrike (CRWD) presents arguably a no-brainer idea as a long-term investment because cybersecurity cannot be ignored. In late May, Victoria's Secret (VSCO) had to take down its website temporarily due to a data breach. It represented the latest high-profile example of the risks businesses face in the modern digitalized ecosystem.
Given that nefarious online activities are unlikely to fade anytime soon, CrowdStrike enjoyed a shot of relevance, sending CRWD stock higher. Further, the equity is up almost 37% on a year-to-date basis, easily outperforming the benchmark tech index. Still, there could be some more upside remaining.
In the past two months, CRWD printed a '6-4-U' market breadth sequence: six up weeks, four down weeks, with a net positive trajectory across the 10-week period. Notably, in 61.9% of cases, the following week's price action results in a gain, with a median return of 4.04%.
Should the implications of the 6-4-U pan out as projected, CRWD stock could reach $487.33, possibly within a week or two.
Based on the above market intelligence, aggressive traders may consider the 475/485 bull call spread expiring June 27. Using data available to Barchart Premier members, this transaction involves buying the $475 call and simultaneously selling the $485 call, for a net debit paid of $480. Should CRWD stock rise through the short strike price at expiration, the maximum reward is $520, a payout of over 108%.
Johnson & Johnson (JNJ)
At first glance, healthcare giant Johnson & Johnson (JNJ) doesn't particularly seem attractive. True, JNJ stock benefits from a Moderate Buy consensus rating from Wall Street analysts. On the other hand, the Barchart Technical Opinion indicator rates the equity as a 40% Sell. It's not the worst signal in the world but it's not exactly comforting either.
Nevertheless, there's a chance that JNJ stock can break out of its sideways funk that it's been on since early April. As it stands, the security printed a 6-4-D sequence: six up weeks, four down weeks, with a net negative trajectory across the 10-week period. In 66.67% of cases, the following week's price action results in upside, with a median return of 1.33%.
If the implications of the above pattern pan out as expected, JNJ stock could theoretically reach above the $157 level. Assuming the bulls maintain control of the market, a push above $158 isn't out of the question.
With the above intel in mind, aggressive traders may consider the 155/157.50 bull call spread expiring on June 20, which is less than two weeks from now.
Lululemon Athletica (LULU)
For a high-risk, high-reward idea, speculators may consider Lululemon Athletica (LULU). As Barchart content partner Motley Fool mentioned, LULU stock crashed after the underlying company released its first-quarter earnings report. Actual results were so-so but the market seemed to reserve the bulk of skepticism toward President Donald Trump's tariffs policy, which appeared to contribute to a weak sales outlook.
Whatever the case, LULU stock dropped nearly 20% on Friday. Not surprisingly, the financial publication ecosystem has largely labeled the security a name to avoid. However, from a statistical standpoint, Lululemon could be interesting.
In the past two months, LULU stock printed a 6-4-D sequence: six up weeks, four down weeks, with a net negative trajectory across the period. In 60.71% of cases, the following week's price action results in upside, with a median return of 6.12%. That means if the implications of the above pattern pan out, LULU could hit $281.50 within a short time frame.
For those who really want to swing for the fences (but do so rationally), the 275/280 bull call spread expiring June 27 is awfully tempting. This transaction calls for a net debit of $185 and if LULU stock rises through the short strike price at expiration, the maximum reward is $315, a payout of over 170%.