Today is another big day for the market with an FOMC decision after the close.  And this time, unlike most of the recent past, there’s some uncertainty as to what the Fed will do.  Last week, it seemed more likely that the rate cut would be 25 bps.  Now, 50 bps seems more likely:

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The CME FedWatch Tool shows live odds of where we are likely to end up this afternoon, and it’s far from clear which way things will go.  And that means the market is prime for potential volatility.

So, I have to consider not only what that will do to the market, but which sectors might be most impacted.  Or, in my case, I prefer looking for stocks that may be less impacted by the FOMC decision and more impacted by other key inputs.  Once I know the FOMC decision, I can look at financials, homebuilders, etc. that have been prone to moves in rate projections, but for today, I want to look at a stock that’s starting to show signs of a potential move with or without the FOMC decision.

And that stock is AI:

As you can tell from the stock symbol and company name, C3.ai is tied to artificial intelligence.  And the stock chart is looking very intriguing here as it is finally above the 20-Day Moving Average.  That could be setting up a squeeze toward prior highs in the low 30’s.

What’s more?  AI has historically low implied volatility:

*From CBOE LiveVol

This means that the market is predicting future movement in AI to be historically less than the norm.  That means that options are as cheap as they get.

So, in this case, where I have an idea of a stock that can move higher with or without the FOMC’s help and a leverage element that’s incredibly favorable, I can get that much more excited about the opportunity!

If you’d like to get a list of ideas and setups just like this that could be of interest for trading opportunities, check out my Outlier Watch List.

And as always, please go to http://optionhotline.com to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades.  And if you have any questions, never hesitate to reach out.

Keith Harwood

Keith@optionhotline.com