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I’m going to start this analysis with a confession: I don’t really know much about Atlassian Corp (TEAM). And if I’m really going to ruffle feathers, I don’t really care to. This is not a story about the fundamentals of TEAM stock and my opinion on the matter.
Instead, I’d like to explore a far more intriguing topic: the genetic string of market sentiment that undergirds TEAM stock (and all other publicly traded securities).
At first glance, the concept of mixing genetics with financial analysis may seem absurd. However, the equities ecosystem represents the culmination of human fear and greed at constant war with the other. Because of the human footprint manifested in speculative activities, the market (in my opinion) invariably features a genetic code.
And much like the real field of genetics, the coding that undergirds market sentiment repeats in cycles, patterns and frequencies. By deciphering these elements, it’s possible to build a probability matrix. However, the challenge with traditional analytical methodologies is the reliance on continuous-time signal processing frameworks.
Simply put, metrics such as share price and revenue represent open-ended scalar realities. For example, is $10 a good price for a stock? It depends — it could be wildly cheap, outrageously expensive or somewhere in the middle. The price itself is statically meaningful but kinetically useless.
To discover recurrences, one must see patterns — and to see patterns, one must operate within a paradigm of finality. Such boundaries can only be achieved through discrete-event analyses. By categorizing share price — in this case, TEAM stock — not as a random distribution of numbers but as a genetic sequence, it’s possible to extract a musicality of investor sentiment.
By monitoring sequences, we can recognize patterns — especially recurring patterns. From there, we are better able to extract a more meaningful, market-realistic price forecast. Better yet, TEAM stock could be flashing a contrarian buy signal.
A Rare Reversal Pattern Emerges for TEAM Stock
On Monday, TEAM stock ranked among the securities listed in Barchart’s unusual stock options volume list. Specifically, total contracts hit 9,872 contracts against an open interest reading of 61,809 contracts. Monday’s volume represented a 73.56% lift over the trailing one-month average, indicating heightened interest.
In terms of the breakdown, call volume reached 9,116 contracts versus only 756 puts, bringing the put/call volume ratio down to 0.08. While this sounds decisively bullish, options flow (which exclusively filters for big block transactions likely placed by institutional investors) showed that most of these calls were sold, indicating neutral-to-bearish sentiment.
However, it’s important to note that net trade sentiment last week was firmly on the bullish side of the ledger thanks to massive volume of sold puts expiring last Thursday. With that exposure gone, TEAM stock could be resetting, waiting for the next major catalyst or turning point.
Statistically, Atlassian could be due for a reversal.
Using a discrete-event analysis, I noted that in the past two months, TEAM stock printed in totality a “2-8” sequence: two up weeks, eight down weeks. This pattern is rare, having only materialized 12 times in the trailing 10 years. But the main takeaway is that in nearly 67% of the cases, TEAM popped higher in the subsequent week following the 2-8 sequence, with a median return of 5.46%.
Assuming the probabilistic outcome, shares could potentially reach around $203 by this Friday. Over the next three weeks, TEAM could potentially poke its head above $209 before settling at a base level around $208 to $209.
On the downside, TEAM stock could see a drop to $186.50 by this Friday if the bullish thesis doesn’t pan out. Historically, even under the negative pathway, investors will likely build a support line over the next five weeks at around the $192 level.
Plotting a Bullish Strategy for Atlassian
Given the possibility that TEAM stock could potentially breach the $203 level by the end of this week, the most aggressive traders may consider the 195/202.50 bull call spread expiring April 25. This transaction involves buying the $195 call (at an ask of $620) and simultaneously selling the $202.50 call (at a bid of $210), resulting in a net debit paid of $410.
Should TEAM rise through the short strike price, the maximum reward is $340, a payout of nearly 83%.
In terms of the most aggressive move, that would probably belong to the 195/205 bull spread expiring May 2. This transaction’s net debit comes out to $480 at time of writing, with a maximum reward of $520, a payout of over 108%.
It’s tempting, certainly, but also risky. Historically, a week of strong accumulation tends to lead to distribution in the subsequent week. For the 195/205 bull spread to work, TEAM stock would need to call an audible and break away from its tendencies.
It could happen but personally, I would be more comfortable with a lower short strike price based on the empirical data.
