Correction Presents New Alpha, Option Chain Bets on 5 Stocks Ready to Shine With Technical Strength

As we warned on Tuesday about overstretched market sentiment, AI enthusiasm has cooled since then. Although it is too early to call the correction over, from a fundamental perspective this pullback should be viewed as healthy. Here are 5 stocks showing promising technical strength, supported by heavy option activity suggesting a strong short-term bounce and potential alpha even in a mild market environment.

The consecutive decline across all three major indexes is a reminder that investors should not expect a one-way bull market. Technical signals are showing some concern, as the Dow Jones, S&P 500, and Nasdaq 100 have all seen the MA(3) crossing below the MA(7) and MA(10). A confirmed break of this trend would point to further near-term weakness.

The decline coincided with stronger-than-expected Q2 GDP growth at 3.8% versus 3.3% and Friday's PCE report, as the “buy the rumor, sell the fact” dynamic prompted investors to lock in early gains. Recent speculative AI headlines such as Oracle-OpenAI, Intel-Nvidia, and Nvidia-OpenAI partnerships have added to concerns of a bubble and excessive enthusiasm. Now, investors should pivot back to fundamentals to ensure the sector’s outlook remains healthy.

That said, this correction could ultimately prove constructive by cooling down an overheated market. It also provides an opportunity to buy dips in fundamentally solid names with strong technical setups. Thus, we identified 5 stocks that stand out with surging option interest and technical resilience.

Coreweave (CRWV): The AI infrastructure play is now pivoting more toward Nvidia and OpenAI, reducing sole reliance on Microsoft. Interest in the stock echoes Nvidia’s recent $100 billion investment into OpenAI, as most of those funds will flow back to Nvidia through chip leasing while Coreweave benefits directly via its $6.5 billion deal with OpenAI announced Thursday. Although shares swung sharply from +4% to -4% on Thursday, options traders remain bullish with 6,568 and 6,276 contracts on the $136 and $140 calls expiring next Friday, implying over 8% upside. Technically, the stock is still in a "higher low, higher high" bullish pattern, though $148 remains a major resistance.

ExxonMobil (XOM): As tech corrects, energy is attracting hedging flows. Traders piled into more than 3,000 and 4,000 call contracts at the $117 and $120 strikes expiring next Friday, more than double the at-the-money open interest, betting on further upside. XOM continues to perform well amid lower oil prices, with the stock in a bullish pattern and approaching the key $115 resistance. A breakout above that level would confirm further momentum.

AMD: The stock remains resilient despite Nvidia’s expansion of partnerships, and traders are betting on a potential catalyst ahead. Open interest shows over 18k and 13k contracts for the $170 and $177.5 calls, more than double the 7,549 contracts at-the-money, signaling extraordinary bullish sentiment. Technically, AMD continues to follow a higher low, higher high structure, outperforming the broader market pullback.

Amazon (AMZN): Shares have sold off heavily, largely due to intensifying cloud competition driven by AI. However, traders are positioning for a sharp rebound with 191,000 and 231,000 contracts on the $235 and $240 calls compared to just 4,400 at-the-money contracts. Technically, the stock is in rare oversold territory with RSI at 20, last seen on August 4 when AMZN rebounded over 5% in two days. The setup suggests strong potential for a short-term bounce.

AT&T (T): The stock shows a similar pattern with unusually heavy out-of-the-money call activity compared to at-the-money and in-the-money positions. In particular, 4,004 contracts were placed on the $31 strike expiring next Friday, implying more than 11% upside, which is highly unusual for such a low-volatility stock. AT&T is also sitting on a key support level with RSI at 22. A rebound looks attractive here, though a new session low would warrant more caution.