It’s not the print that Wall Street was looking for from conversational artificial-intelligence technology provider SoundHound AI (SOUN). While revenue of $29.1 million bested the year-ago quarter’s tally of $11.6 million by a 151% margin, the figure missed analysts’ consensus target. Further adjusted net losses widened to $22.3 million from $20.2 million, raising concerns about financial viability.

As such, SOUN stock stumbled quite badly, losing 7.8% on Friday. On a year-to-date basis, the equity finds itself down almost 55% — demonstrating promise thanks to its compelling AI products but also worrying investors amid broader economic and competitive challenges.

Still, at the end of the day, the only quantifiable metric that we can focus on and analyze across sentiment regimes is market demand. Everything else is largely noise.

At the heart of every transaction in the equities sector is an information battle. Bulls believe a particular market or asset is undervalued and are therefore willing to pay money now for the hopes of capital gains later. On the other hand, bears believe that same market or asset is overvalued and are willing to sell it.

In the case of SOUN stock, the security has historically featured a negative bias since its public market debut. At any given moment, the chance that a one-week long position will be profitable is only around 47%. However, under certain sentiment regime, the probability of upside can improve significantly over this baseline.

In other words, it’s not a good idea to speculate on SOUN stock without a plan. But when the deck becomes hot, there is more of an incentive to place a bold wager.

Playing the Numbers Game with SOUN Stock

In the past 10 weeks, SOUN stock printed a “3-7” sequence: three weeks of upside mixed with seven weeks of downside, with an overall negative trajectory across the period. From a visual standpoint, this pattern doesn’t appear to be anything special. However, from a quantitative perspective, the 3-7 has more often than not represented a reversal signal.

What makes the sequence compelling is that it’s falsifiable. Unlike certain disciplines of technical analysis, you’re not left with interpreting chart patterns, such as head and shoulders or cup and handle. The 3-7, while a niche classification, can be observed on any historical datapoint on SOUN stock.

Further, falsifiable information can be categorized, quantified and ultimately utilized for probabilistic analysis. The same cannot be said about chart patterns because of the subjective nature involved.

Thanks to the categorization, we know from past data that when the 3-7 sequence with a net negative trajectory flashes, there’s a 58.33% chance that the following week’s price action will be positive. Not only that, the median one-week return stands at a robust 13.58%, whereas the median one-week loss (should the bears take control) is 7.39%.

Stated differently, from both a probabilistic and payout viewpoint, there’s a heightened incentive to take a wager on SOUN stock.

To be clear, SoundHound still ranks as a highly speculative idea. It’s just that if you already were planning on betting on this company, there’s a time to wager and there’s a time to sit on the sidelines.

This could be a case of the former situation.

Plotting an Aggressive Strategy for SoundHound AI

If the implications of SOUN stock’s forecast are correct, the equity could exceed $10 a pop by the end of this week. That’s really aggressive, although I do like the price target itself. For a more balanced approach, the 8.50/10 bull call spread expiring June 6 is awfully tempting.

This transaction involves buying the $8.50 call and simultaneously selling the $10 call, for a net debit paid of $65. Should SOUN stock rise through the short strike price of $10 at expiration, the maximum reward stands at $61, a payout of nearly 131%.

Those who are Barchart Premier members can easily compare and contrast other debit call spreads at a glance, making this tool a must-have for serious traders. Other trades with the same short strike price carry payouts of 156% and even 163%.

Those who want to elevate their risk-reward profile a half-step higher can even have access to payouts exceeding 200%. Access to this and other pieces of critical data is available with Barchart Premier — don’t miss out!