Can AI Fervor Continue to Lift BigBear.ai (BBAI) This Week?

Easily one of the big winners in the equities space last week, BigBear.ai (BBAI) – an artificial-intelligence-powered decision intelligence platform – saw its shares gain over 79%. Much of the sentiment focused on BigBear’s recent acquisition of an AI specialist. However, the dramatic success of Nvidia (NVDA) has legitimized digital intelligence, thereby lifting all boats, including BBAI stock.

On Friday, BigBear announced that it completed the acquisition of Pangiam Intermediate Holdings, LLC, billed as a leader in vision AI for the global trade, travel and digital identity industries. Per the press release, the buyout should accelerate and evolve BigBear’s mission to create clarity for the world’s most complex decisions in three markets: national security, supply chain management and digital identity.

However, the acquisition occurs against a much-bigger context of mainstream AI integration. That was especially the case on Friday. As Barchart content partner The Motley Fool mentioned, several AI-related technology players saw their valuations rise following the impressive fourth-quarter earnings performance of Dell Technologies (DELL).

Fundamentally, investors were encouraged that Dell enjoyed intense demand for its AI servers. Downwind, this dynamic translates to increased demand for AI-empowered services, which bodes very well for BBAI stock. Thus, the underlying company enjoyed a wealth of riches.

Still, the market is forward-looking. Will there be enough to justify investment in BBAI stock this week? Let’s find out.

Options Flow Data Identifies Trading Band for BBAI Stock

Following the close of the Friday session, BBAI stock unsurprisingly represented one of the top highlights of Barchart’s unusual options volume screener. Essentially, this screener gives investors a clear picture of what the big dogs of the market are buying (or selling). For BigBear, total volume reached 91,099 contracts against an open interest reading of 109,666.

Notably, the difference between the Friday session volume and the trailing one-month average metric came out to 568.62%. Further, call volume reached 82,345 contracts while put volume landed at 8,754 contracts. On paper, this pairing yielded a put/call volume ratio of 0.11, implying more engagement of calls than puts.

However, we must be careful with face-value interpretations. To better understand the character of the market, I turned to Barchart’s options flow screener. One of the most valuable tools, this screener ignores the one or two contracts that your Uncle Bob might buy. Instead, it focuses on big block transactions, most likely placed by institutional investors.

Since Feb. 27 and confirmed through options flow data from other finpub resources, four transactions stood out (all of them sold calls):

• 4,169 contracts of the MAR 15 ’24 $3.00 Call, placed on Feb. 27.
• 2,182 contracts of the JAN 16 ’26 $5.00 Call, placed on Feb. 28.
• 1,032 contracts of the MAR 15 ’24 $4.00 Call, placed on Feb. 29.
• 3,997 contracts of the MAR 8 ’24 $4.50 Call, placed on March 1.

Sold (written) calls are essentially wagers that the underlying security will not rise above the listed strike prices. If they do, the call writers are on the hook to fulfill the terms of the contract; that is, selling the stock at the strike price to the call buyer.

What’s interesting is that the $4 sold call coincides with BBAI stock printing what appears to be a double-top formation. In the field of technical analysis, a twice-failure to move past a key resistance level – especially a psychologically satisfying round number – could pose challenges for the bulls.

That’s why in the immediate framework, the bearish approach might be the most prudent. After all, both BigBear-specific and industry-catalyst news have likely been priced into BBAI stock. Now, the bears may be moving in.

Also, the smart traders see little chance of BBAI stock moving past $4, let alone $4.50 or $5. Indeed, many believe shares could fall off the support line of $3. Thus, the bears may be in control at this moment.

Watch the $3 Level

For those not wanting to speculate on the downside, I would still be more comfortable waiting. Given that the options flow data shows heavy volume of sold calls at $4 that won’t expire until the middle of the month, patience may be the wisest approach.

Further, with heavy volume of sold calls at $3, that might be the target that the bears attempt to push BBAI stock down to. So, if you’re aiming to load the boat for a long-term position, you might get a better entry point near $3.

It will pay to wait if the pessimists drive shares down. At $3, you’d be getting a 13.3% discount against Friday’s close.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.