These 4 Frothy Tech Stocks Might Be Due for a Reality Check Soon (July 9 2025)
Your Quantamental guide to the the most promising trade setups in the market
Good morning friends,
Welcome back to Quantamental Zone Alerts.
This week—with TACO sentiment in full mast (thanks to another round of tariff backpedaling), the Nasdaq back at record highs, and the market showing early signs of rotating out of tech—we figured, why not capitalize on what could be a ticking time bomb?
So instead of hunting for undervalued gems, today’s Quantamental screen focuses more on the exact opposite:
Tech stocks with sky-high valuations, recent price surges, and volatility cranked all the way up to eleven—all while nearing major resistance zones.
And it’s got four new names for you in this issue. Let’s get to it.
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New to our Quantamental zone alerts? Here’s everything you need to know:
Each week, we screen for longer-term setups using a Quantamental approach—basically combining quantitative techniques and solid fundamental analysis.
Using our different Quantamental screens, we surface high-potential names with a strong track record, trading at a discount—and of course, with the timing lining up in our favor.
Last week, we used a mix of Div yield, Payout ratio, P/FCF, and Zones to find a few promising stocks:
This week, here’s what we’re looking for:
High Price-to-Sales multiple (top 10% vs 3Y history)
We’re looking for stocks trading at the high end of their own 3-year valuation range. A stretched P/S ratio—especially when it touches the high 80s to 90s, percentile-wise—means the stock is not just expensive in absolute terms, but pricey relative to how it’s been valued historically.
It tells us that the market’s betting big on its future. But if that narrative falters, these names often fall the hardest.
Strong 1-month price performance (Returns >15%)
We’re looking for stocks that have gone near-vertical recently. Explosive short-term moves quickly run into resistance and are often unsustainable. We’re after those that look like they’ve overextended themselves.
High beta (>1.5)
Volatile stocks move big in both directions. Which is great both for catching sharp reversals and avoiding dead money. These names can drop just as quickly as they climb, depending on sentiment.
Approaching key zones (near a strong resistance)
Once our fundamentals check out, we look to the charts. If a stock’s barreling toward (or was just in a head-on collision with) a well-tested resistance zone, we’ll be watching for signs of a reversal.
Btw, you can replicate our first three Quantamental criteria using any stock screener out there (we’re using Koyfin, but you can also use free ones like Finviz).
As for which stocks are nearing zones, you can find all that and more in the Trading Places platform:
What’s in this issue:
• High-potential opportunities
• This week’s most actionable setup
Our Quantamental screen results
Here are some of the names that popped up on our screens this week:
1. Oracle Corporation (ORCL)
P/S (3Y Rank): 100th percentile
Total Return (1M): 34.75%
Beta (1Y): 1.51
2. Credo Technology Group Holding Ltd (CRDO)
P/S (3Y Rank): 92nd percentile
Total Return (1M): 27.96%
Beta (1Y): 3.27
3. IonQ, Inc. (IONQ)
P/S (3Y Rank): 97th percentile
Total Return (1M): 15.25%
Beta (1Y): 2.45
4. SoundHound AI, Inc. (SOUN)
P/S (3Y Rank): 91st percentile
Total Return (1M): 25.72%
Beta (1Y): 3.11
Most actionable setup this week: SOUN
Technology • Software - Application • USA • NASD
Unlike our quiet-but-confident picks from previous issues, our featured stock today is a bit more… amped.
SOUN checked, shaded, and circled each and every box on our “frothy, twitchy, and flying high” watchlist… twice.
It’s also looking a bit overdue for a comedown.
The stock just notched a +25.7% gain over the past month—a monster move that’s great for anyone with a time machine… but for us, it only means it’s now firmly in overextension territory.
Meanwhile, its Price-to-Sales ratio is 49.9x—investors are paying nearly 50 times every dollar of revenue. But what you should really look at is where that sits relative to its history: right near the top of its 3-year P/S range.
That implies the market is pricing in a lot of future growth… perhaps too much? And SoundHound would need to pull off some serious revenue magic to justify where it’s trading today.
Now, we’re not saying it’s impossible—but do us a favor and check your iPhone for a sec. Which one do you have on your control center again? SoundHound or Shazam? Oh right…
Then there’s the volatility. A beta of 3.11 tells us that this thing moves. More than three times as much as the broader market, in fact. And while that could be a good thing in an upward market… in this market—one where sentiment can turn 180 based solely on a tweet—it just makes the stock incredibly vulnerable to sharp reversals, especially around major resistances.
And speaking of resistances, let’s now turn to our zone chart.
If you look real close at yesterday’s close (and today’s open), you’ll see that SOUN (currently $13.03 as of writing) is already above its January 2025 zone.
But—and this is important—our algorithm hasn’t marked it as a clean penetration just yet (no ⚡ symbol). Which means this could still be a failed attempt.
And it wouldn’t be the first. This same zone, albeit new, has already served as a strong deterrent to breakouts back in May, sparking a 20% drop over the following week.
If it holds again, it could send SOUN tumbling down back to single digies.
That’s it for today’s issue of our all-new Quantamental Zone Alert. We’ll be back next week with fresh setups nearing key zones.
In the meantime:
Want to find more immediate setups?
The Trading Places platform is live—and free! Head on over and check out the Zone Scanner and Live Hot Picks.
Disclaimer: This isn't financial advice. This shouldn’t be news to you.