One of the major concerns regarding investment market analysis is the acceptance of presuppositional fallacies as actionable insights. While mentioning a decline in share price or a financial valuation ratio may be a statement in fact, the fallacy occurs when the analyst assumes that the metric at hand carries predictive value without first validating the assumption.

For example, in the financial publication space, you’ll often hear phrases like such-and-such stock may bounce off support or that a company’s modest price-to-earnings ratio represents good value. However, these claims are merely assertions unanchored to an empirical basis. The claims could turn out to be accurate or they might not — they’re educated guesses at best.

To avoid falling into the presuppositional fallacy trap, I prefer to utilize conditional probabilities — using past analogs to determine forward probabilities. However, financial metrics such as share price or valuation ratios are continuous signals, which prevent easy categorization. To remedy this dilemma, I convert past historical data into market breadth — or sequences of accumulative and distributive sessions.

By default, demand profiles based on binary market breadth data, lend themselves to categorization and quantification. Because each profile is a distinct, discrete behavioral state, it’s possible to monitor the probability of transition from one state to another. Such an analysis would simply not be possible when using continuous signals such as raw share prices.

The other critical advantage of converting price data into market breadth is that all publicly traded securities now speak the same language. This data can then be thrown into a spreadsheet, where it can be sorted based on probability of upside.

That’s exactly what we’re doing here with the Saturday Spread. We’re focusing on the most actively traded stocks which statistically offer higher-than-average odds for bullish speculators. Using math doesn’t guarantee success but what it does is provide a rational justification for betting.

Gilead Sciences (GILD)

Let’s get right into it with biopharmaceutical giant Gilead Sciences (GILD). In the past two months, the price action of GILD stock can be converted as a 4-6-U sequence: four up weeks, six down weeks, with a positive trajectory across the 10-week period. Admittedly, this process compresses GILD’s magnitude dynamism into a simple binary code. However, the benefit is that this code can now form the basis of past analogs for the purpose of calculating probabilistic analysis.

Statistically, in the past five years, whenever GILD stock printed a 4-6-U sequence, there’s a 69.23% chance that the following week’s price action (which corresponds to the business week beginning June 30) will result in upside, with a median return of 3.41%. Should the bulls maintain control of the market, GILD may see an additional 2.22% increase in the second week.

What makes this setup intriguing is that, as a baseline, the chance that a long position in GILD stock will be profitable is 53.1%. Therefore, the 4-6-U sequence is signaling a potential 16.13% long-side delta over the baseline, strongly incentivizing a debit-based strategy.

Using the market intelligence above, GILD stock could hit close to $117 within two or three weeks. According to information provided to Barchart Premier members, risk-tolerant speculators may consider the 111/116 bull call spread expiring July 18. This transaction requires a net debit of $211, with a maximum reward of $289 possible if GILD reaches $116 at expiration.

As stated above, that’s statistically a rational target, making this trade very enticing.

McDonald’s (MCD)

Another name to keep on the radar for next week is fast-food icon McDonald’s (MCD). In the past two months, MCD stock printed a 3-7-D sequence: three up weeks, seven down weeks, with a positive trajectory across the period. Ordinarily, the balance of distributive sessions far outweighing accumulative sessions could dissuade investors from jumping on board. However, investors statistically tend to buy the dip.

How can this statement be justified? In 68.75% of cases, the following week’s price action (again, this corresponds to the business week beginning June 30) results in upside, with a median return of 2.42%. Should the bulls maintain control of the market for a second week, past responses reveal that the median return is an additional 2.04%.

As a trusted blue-chip stock, McDonald’s already enjoys an upward bias. As a baseline, the chance that a long position will be profitable over any given week is a stout 56.64%. Therefore, unless you had a compelling reason to go contrarian, it’s better to be bullish. That’s even more so when it comes to the 3-7-D sequence, which adds 12.11 percentage points of favorable odds to the bullish speculator.

From the market intelligence above, MCD stock could be on its way to reach around $304.70 within the next two to three weeks. Notably, market makers have a dim view of the Golden Arches. Therefore, the 295/300 bull call spread expiring July 25 offers a 123.21% payout, with a net debit required of only $224. It’s risky but awfully tempting given the empirical framework.

Trump Media & Technology (DJT)

A controversial company, Trump Media & Technology (DJT) nevertheless deserves consideration, in part because President Donald Trump has been scoring multiple political victories. Thanks to the meme-like qualities of DJT stock, the security could potentially pop higher following its extended slump.

There’s also a quantitative logic at play here. In the past two months, DJT stock printed a 2-8-D sequence: two up weeks, eight down weeks, with a negative trajectory across the period. While an ugly sequence due to the heavy presence of distributive sessions, investors historically tend to buy the dip.

Whenever the 2-8-D sequence flashes, the following week’s price action results in upside, with a median return of 1.7%. Should the bulls control the market for a second week, the median return assuming the positive pathway is 8.06%. What’s really enticing is that in the fourth week, irrespective of the pathway, DJT’s median return is, at minimum, 23.33%.

To be clear, there are zero guarantees in this game. However, if you had some “stupid money” to gamble with, DJT stock is an idea to keep on your radar.

DJT has been moving all over the map on Friday, creating some chaos in the options market. However, one idea to consider is the 18/19 bull call spread expiring July 25. While this trade requires a sizable leap from DJT, past analogs demonstrate that such upward mobility is possible, perhaps even probable.