By its label alone, investors who are already jittery about the new economic paradigm may be tempted to avoid medical device firm Medtronic (MDT). As Barchart’s algorithm noted, MDT stock is one of the securities in danger of printing the dreaded death cross — a phenomenon where the 50-day moving average slips below the 200 DMA.

On paper, the death cross is a mathematical exercise, simply denoting the point where a shorter-term trendline intersects below a longer-term one. However, from a narrative perspective, this indicator is significant because it symbolizes broader demand loss. Investors may be losing confidence in the business; hence, the rush for the exits.

Adding to the pressure, Medtronic will soon release its results for the fourth quarter of fiscal 2025. With MDT stock having gone nowhere for the past 52 weeks, investors will want to see compelling reasons to justify exposure to the underlying business.

Despite the cloudy weather hovering over Medtronic, bold speculators could be incentivized to give MDT a second look. For one thing, the death cross isn’t always the most reliable indicator of doom and gloom. In many cases, it’s a contrarian signal. Once the ominous intersection materializes, much of the bad news has already been baked in.

A perfect example is Trade Desk (TTD). Earlier this year, TTD stock flashed the death cross — largely a consequence of a poor earnings report. However, at the beginning of this month, I stated that TTD printed a reversal pattern from a quantitative perspective. Sure enough, the equity went on a remarkable run, gaining almost 36% in the past five sessions.

To be frank, I don’t anticipate such a robust response in MDT stock. Nevertheless, it may be premature to call it quits on the medical device firm.

Taking Advantage of the Hot Deck in MDT Stock

Historically, Medtronic has attracted speculators for its advanced innovations, such as its products and software for diabetes management. However, the challenge with MDT stock is its choppy nature. At any given moment, the chance that a one-week long position will be profitable is only 50.6%. Yes, technically speaking, MDT enjoys an upward bias. Still, it’s hardly what you would call a reliable edge.

At the same time, it would be inaccurate to characterize MDT’s long-side success ratio at under 51% for all sentiment regimes. Some cycles may feature probabilities with a substantive delta relative to the baseline odds.

In colloquial terms, it’s better to bet on MDT stock when the deck heats up.

From a quantitative viewpoint, Medtronic’s risk-reward profile appears to favor bullish speculators, thus warranting a closer examination. Specifically, MDT stock is currently riding a “3-7” sequence: three weeks of upside mixed with seven weeks of downside, with a net negative trajectory across the period. What’s significant about this pattern is that in the subsequent week, the odds of upside stand at 57.5%.

There is an argument to be made that an additional seven percentage points of favorable odds isn’t going to move the needle that much. But keep in mind that market makers are pricing options based on the long-side probability of 50.6%. With the quantitative signal suggesting that the odds are greater than advertised, MDT derivatives are theoretically underpriced.

Stated differently, MDT options are likely priced as if the deck is a standard one. However, the 3-7 sequence is declaring that the deck is actually hot, incentivizing speculation.

Charting a Rational Course for Medtronic

Assuming that the bulls maintain control following the 3-7 sequence, investors can anticipate MDT stock challenging the $87 level before leveling off at around $86 over the next 10 weeks. Should the bears take the wheel, the downside target is between $81 and $82.

Arguably, the most aggressive multi-leg options strategy that operates within a window of rationality is the 85/87 bull call spread expiring June 6. This transaction involves buying the $85 call and simultaneously selling the $87 call, for a net debit paid of $107. Should MDT rise through the short strike price at expiration, the maximum reward is $93, or a payout of nearly 87%.

What makes this trade attractive is that MDT should have a solid opportunity to rise just above the $87 level over the next three weeks. In the open market, such a move is only about a 3.3% lift. Thanks to the leverage of options, though, the derivatives-based approach provides a much bigger payout.