On the surface, Trade Desk (TTD) would seem to be a terrible investment. No, it’s not because the business itself stinks. As a leader in independent programmatic advertising, it fits well into the exploding connected TV (CTV) market. Further, Trade Desk has positioned itself as the anti-walled garden, offering transparency and control compared to closed ecosystems like Google.

Unfortunately, strong fundamental elements weren’t enough to protect TTD stock from broader economic pressure. Throughout its history, the underlying company had never missed management’s revenue guidance. Unfortunately, in its most recent disclosure, that streak came to an end, resulting in a huge downturn in the equity. Since the start of the year, TTD stock slipped more than 54%, an absolute hemorrhaging.

There were other challenges besides the revenue miss, including slower adoption of an artificial-intelligence-driven platform, along with rising competition in the digital advertising landscape. Further, the latest financial disclosure created what analysts love to refer to as valuation compression or a reevaluation of the enterprise’s potential.

Not surprisingly, the death cross flashed in early March, shortly after the disappointing earnings disclosure. And in this case, the death cross did live up to its name.

At the time the technical indicator flashed — which usually involves the 50-day moving average slipping below the 200 DMA — TTD stock was trading hands at around $65. Yesterday, the equity closed $53.63, reflecting about a 17.5% loss. Nevertheless, investors who are looking for a bargain-basement deal will want to keep their sights locked on Trade Desk.

It’s not just about the death cross often representing a contrarian indicator — though this has something to do with it. After all, when the death cross flashes, as a lagging indicator, it mathematically suggests (though not perfectly) that most of the bad news has been baked in.

Let’s put it this way: you’re not catching anyone by surprise by being bearish after the death cross flashes.

Using the Russian School of Forecasting to Decipher TTD Stock

In a very real sense, the Russians have developed the foundation of probabilistic science that undergirds investment market forecasting. They just never thought of their invention in that manner. At the time, especially under the Soviet Union, the Russians were obsessed with applied probability to model decision-making under uncertainty.

If it worked back then for that high level of a purpose, in my opinion, it has plenty of uses in the financial market. Indeed, the model that I’m currently using is, in my estimation, too stupid to fail.

There are two factors that make forecasting stocks wildly chaotic: the system is open and it’s non-linear. That means stupid [stuff] from outside the paradigm can come in, kick your thesis in the groin and quickly exit said paradigm while you writhe in agony.

To counter this reality, forecasting needs to be “stupid” — stupid enough to work across various situations and sentiment regimes, much like a Kalashnikov rifle.

About the only thing that’s worth tracking, then, is demand. Pure and simple, baby! Is the market a net buyer for a given time period or is it not? It’s one or the other. There are no half-demand states of existence.

With this framework in mind, we can identify TTD stock as having printed a “3-7” sequence during the last 10 weeks: three weeks of upside interspersed with seven weeks of downside, with a negative trajectory across the period. The significance of the 3-8 is that when this sequence flashes, there’s a 68% chance that the following week will see an upswing.

Moreover, downside-dominated streaks really don’t last long without a bullish response. It was roughly three years ago that the last 3-7 sequence flashed — and in the next 10-week sequence, TTD stock printed a 6-4 sequence, followed by another 6-4.

The best part? All of the above sequences are falsifiable — no Fibonacci seances required.

An Aggressive Trade for Risk Takers

For those who want to bet on a reversal, the 55/57 bull call spread expiring May 16 offers a potentially attractive idea. This transaction involves buying the $55 call and simultaneously selling the $57 call, for a net debit paid of $90. Should TTD stock rise through the short strike price of $57 at expiration, the maximum reward stands at $110, or a payout of over 122%.

What I like about this trade is that over the next three weeks, TTD stock is forecasted to hit $58.52, assuming the positive pathway wins out in response to the aforementioned 3-7 sequence. If not, the negative pathway leads to a path toward $50.17. Historically, though, TTD tends to bounce back from downside-dominated streaks.

Over the longer term, don’t be surprised to see TTD stock encounter choppy weather. With the prospect of lumpiness further out over the horizon, nearer-term wagers may be more appropriate for Trade Desk; hence, the May 16 expiration date.