To The Moon

In my previous few article, we have explored the reason behind BBAI recent performance and also did a comparison of my holdings of both these two stocks ($BigBear.ai Holdings(BBAI)$ and $Palantir Technologies Inc.(PLTR)$).

In this article I would like to explore the building of a volatility-adjusted entry strategy for BigBear.ai (BBAI) and compare its beta and risk profile to SoundHound AI ($SoundHound AI Inc(SOUN)$), another high-beta AI peer.

First we will explore how BBAI Volatility-Adjusted Entry Strategy looks like.

Volatility-Adjusted Entry Strategy for BBAI

Given BBAI’s extreme price swings, a smart entry strategy should balance upside potential with risk containment.

In the next subsection, I will run through the steps that we can explore to create this strategy.

Step 1: Define Volatility Bands

• 30-day ATR (Average True Range): ~$0.84

• Current Price: ~$5.84

• Volatility Buffer: 1.5× ATR = $1.26

This suggests a buy zone between $5.00–$5.50 on pullbacks, with a stop-loss ~1.5× ATR below entry (e.g., $4.25).

Step 2: Position Sizing via Kelly Fraction

• Win Rate Estimate: 55%

• Reward/Risk Ratio: ~2.0

• Kelly Fraction: ~20% of capital (scale down to 5–10% for risk control)

Step 3: Entry Triggers

• Technical Confirmation: MACD crossover + RSI > 50

• Volume Surge: >1.5M shares/day

• Catalyst Window: Ahead of earnings or defense contract news

Beta & Risk Comparison: BBAI vs. SOUN

I think the next steps to do is to perform a Beta and Risk comparison for BBAI and SOUN.

BBAI is more volatile and higher beta, but also offers better risk-adjusted returns over the past 12 months.

Strategic Take

• BBAI: Best suited for tactical traders seeking asymmetric upside. Use volatility bands and ATR-based stops to manage risk.

• SOUN: Slightly more stable, but still speculative. Better for momentum swing setups with tighter stop-losses.

In order for us to better understand BBAI from a tactical trading strategy, I feel that it might be important for us to under the historical triggers for BBAI and I will also be sharing a paired trade model to hedge my exposure in this section.

If you are someone who would like to explore this, feel free to share your views and we can discuss.

Part 1: BBAI Chart with Historical Triggers (2023–2025)

Here’s a conceptual overlay of key technical and fundamental inflection points:

This pattern shows momentum-driven spikes tied to defense contracts and AI sentiment, followed by sharp retracements on execution gaps. The current setup suggests a re-accumulation phase.

Part 2: Paired Trade Model — BBAI vs. PLTR (or SOUN)

To hedge BBAI’s volatility, I would be considering a beta-adjusted long/short pair:

Strategy: Long BBAI / Short PLTR (or SOUN)

• Position Ratio: For every $1 in BBAI, short ~$1.65 in PLTR (to beta-neutralize)

• Entry Timing: Long BBAI near $5.50–$5.80 (on pullback) Short PLTR near $148–$152 (resistance zone)

• Catalyst Window: Ahead of BBAI earnings or defense contract news

• Exit Trigger:

• BBAI hits $8.40+

• PLTR retraces to $135–$138

This setup lets you capture BBAI’s upside optionality while hedging macro or sector-wide AI pullbacks via PLTR or SOUN.

BBAI vs. SOUN – 1-Year Price Action & Technical Zones

Trade Zones (July 2025)

Both stocks are in bullish technical setups, but BBAI offers higher beta and asymmetric upside, while SOUN provides stronger revenue growth and balance sheet stability.

BBAI - Technical Analysis - EMA, RSI Momentum With Entry Zone, Stop-Loss, Target 1 and Target 2

SOUN - Technical Analysis - EMA, RSI Momentum With Entry Zone, Stop-Loss, Target 1 and Target 2

Final Note:

While we are seeing both BBAI and SOUN having a good upward positive momentum from RSI, if we were to look at the entry price and space for the bulls to go for daily uptrend continuation, SOUN looks like a better choice based on what I see.

But I think the strategy seeks to profit from the convergence of their relative prices, irrespective of the overall market direction.

Summary

A volatility-adjusted paired trade strategy for BBAI and SOUN involves exploiting temporary divergences in their price relationship, while accounting for their inherent volatility. Both are AI-focused stocks that have shown significant price movements and considerable volatility.

The core idea is to identify when the price ratio (or spread) between BBAI and SOUN deviates significantly from its historical average, considering their individual volatilities. For example, if BBAI becomes relatively "cheaper" compared to SOUN (volatility-adjusted), one would buy BBAI and short SOUN. Conversely, if BBAI becomes relatively "expensive," one would short BBAI and buy SOUN.

The "volatility-adjusted" aspect means the position sizing or entry/exit thresholds are adjusted based on the current or historical volatility of each stock. Highly volatile stocks might require wider thresholds or smaller position sizes to manage risk effectively, aiming for the spread to revert to its mean. This market-neutral strategy seeks to profit from the convergence of their relative prices, irrespective of the overall market direction.

Appreciate if you could share your thoughts in the comment section whether you think this volatility-adjusted strategy for BBAI using Beta and Risk profile compare with its peer, SOUN could help investor benefit.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.