Labor Day Weekend Special Report: Confirmatory Analysis Meets Artificial Intelligence How AI Is Changing the Way We Find, Analyze and Structure Trades—Without Changing the Rules That Got Us Here by Allan Harris I've been trading for a long time. Long enough to remember when getting a stock quote meant calling a broker. Long enough to remember chart books, financial newspapers and commissions that would make today's traders laugh—or cry. Technology has changed virtually everything about trading. Real-time quotes became commonplace. Online brokers replaced phone calls. Charting programs put thousands of securities and decades of price history on our desktops. Options data that once required expensive professional terminals became available to anyone with an internet connection. And now we have Artificial Intelligence. I've increasingly incorporated AI into my trading, and I've reached a fairly simple conclusion: This is a big deal. Not because AI can predict tomorrow's stock prices. It can't. And not because we can ask a computer what to buy and then sit back while it makes us rich. If only it were that easy. AI is valuable because it can make an already disciplined trading process faster, broader and more rigorous. For us, that means one thing: it can make Confirmatory Analysis better. THE SYSTEM HASN'T CHANGED Before going any further, take a look at our current Premium trades. Artificial Intelligence didn't create these results. Our trading methodology did. But increasingly, AI has helped me research the underlying thesis, challenge my interpretation of the charts, compare option alternatives and decide how best to structure the trade. Same system. Better analytical tools. Longtime subscribers know the philosophy. A good story isn't enough. A good chart isn't always enough. I want multiple pieces of evidence pointing in the same direction. Fundamentals can tell us what we should be interested in. Technical analysis tells us when we should act. Options analysis tells us how we may be able to exploit the move with limited capital and substantial leverage. And price ultimately gets the final vote. That's Confirmatory Analysis. Artificial Intelligence doesn't replace any of it. It adds another analytical layer. I still draw the trendlines. I still decide whether a breakout or breakdown is significant. I still decide whether a trade belongs in Blue Line Premium or PRO. Our -50% stop hasn't disappeared because a computer thinks the trade is going to work. AI doesn't make the decision. It helps me make a better-informed decision. A SECOND SET OF EYES One of the simplest ways I use AI is also one of the most valuable: I show it a chart. Not because I need a computer to tell me whether a stock went up or down. I can handle that part. What I want is a second interpretation. Is the breakout as significant as I think it is? What would invalidate the setup? Does the 240-minute chart tell a different story than the Daily? And perhaps most importantly: What am I missing? Every trader has biases. Once we become interested in a trade, it becomes easy to start collecting evidence that supports what we already believe. AI can be useful as a devil's advocate. Instead of asking, “Tell me why I'm right,” I can ask: “Tell me why I might be wrong.” That's Confirmatory Analysis turned on itself. FINDING THE BEST WAY TO MAKE THE TRADE This may be where AI has had the biggest impact on my day-to-day trading: Options. Suppose the chart gives us a Buy Signal. That's only the beginning. Which expiration? Which strike? How much delta do we want? Is implied volatility reasonable? Is the option liquid enough to enter and exit efficiently? In the past, that meant staring at an option chain and mentally balancing a half-dozen variables. I still look at the chain, but now I can give AI the same information and ask it to compare the alternatives. Which option gives us the best bang for the buck? Not necessarily the cheapest option. The most capital-efficient option. Those are two very different things. We've done this repeatedly with QQQ, USO, PURR, SPCX and others. Sometimes the answer is to move closer to the money. Sometimes it is to buy more time. Sometimes the inexpensive lottery ticket really does offer the most attractive risk/reward. And sometimes the analysis says something every trader needs to hear occasionally: Don't chase it. SOMETIMES THE HUMAN SEES IT FIRST AMAT is a good example of what I think the relationship between a trader and AI should look like. I noticed the pattern first. Applied Materials had developed a habit of reversing lower after earnings. Rather than simply trusting my memory, I used AI to examine the previous occurrences, challenge the thesis and help determine whether we had something potentially tradable. Then came the part AI couldn't do for us: We waited for price. The Sell Signal came around $534. AMAT subsequently traded as low as $426—a decline of more than $100. That we didn't take the trade was my bad. But that's not the takeaway. I identified the pattern. AI helped test it. Price confirmed it. AI didn't predict AMAT's decline. Confirmatory Analysis identified an opportunity. And when the next AMAT earnings report comes around, we'll be watching. ANALYZE FASTER. TRADE PATIENTLY. Another benefit is speed. I can now move from chart → fundamentals → news → historical behavior → option chain → trade structure in a fraction of the time that process once required. That doesn't mean trading faster. It means analyzing faster—and still waiting patiently for the right trade. SPCX is a good example. The declining trendline has been broken, which is bullish. But resistance around $150 remains. So is this a Buy Signal—or a setup still waiting for confirmation? Those are the kinds of questions I increasingly use AI to help me think through. Not “tell me what to buy.” Tell me what I may be overlooking. ONE CHART DOESN'T EXIST IN ISOLATION If I'm considering a trade in NVDA, I also want to know what QQQ is doing. If QQQ is approaching a major technical decision at exactly the same time NVDA is testing resistance, that matters. AI makes it remarkably easy to compare those relationships across securities and across timeframes. One chart can provide a signal. Several related charts can provide confirmation—or a warning. WHAT AI CANNOT DO For all of this enthusiasm, there is something AI can't provide: discipline. It can't make us honor a stop when we'd rather hope. It can't prevent us from chasing a stock that has already gotten away. It can't make us sit on our hands when there isn't a good trade. And it certainly can't eliminate losses. Those responsibilities still belong to us. Cut the losers. Press the winners. Let the trend do the heavy lifting. Artificial Intelligence doesn't change those rules. If anything, it reinforces why we need them. AI DOESN'T REPLACE WHAT WORKS Energy may be the best place to finish this discussion. We've traded XLE more than once because a good trend doesn't necessarily give us one opportunity. It can give us a series of them. AI didn't discover the principle: “If it ain't broke, don't fix it.” I don't ask AI what to trade. I ask it to help me make a better decision about a trade I've identified. What AI can do is help us continually reassess whether the fundamental story remains intact, whether the technical trend remains healthy, and whether another options position offers enough reward for the risk. Then we make the trade—or we don't. I've spent decades developing the way I trade. I'm not about to turn it over to a computer. The charts will still trigger the trades. Price will still have the final say. Stops will still protect us when we're wrong. None of that changes. What AI gives us is the ability to analyze more information, compare more alternatives and challenge more assumptions in a fraction of the time it once took. The trader is still driving the car. AI just gave us a much better dashboard. And I think we're only beginning to discover what we can do with it. Active Options PRO Service Premium Service
