Real Money’s Tim Collins looks for a bounce even in the middle of a longer term slide.
Investment bankers like to talk about the movie “Jiro Dreams of Sushi.”
The patter goes like this: The TypeC person will watch this movie and think, “I’m hungry for some sushi.” The Type B person will watch the same movie and think, “I’m going to master making sushi.” But the Type A person will realize that the heart of the movie has nothing to do with sushi at all. They will think, “I’m going to achieve perfection in my own life.”
It’s… surprisingly Zen for the i-banker set, all things considered. But it also applies to our own lessons here. When we talk about trading tips, the short-term takeaway is what stocks to look at. The real lesson is why those stocks make for good or bad opportunities. With that in mind, let’s study Tim Collins’ take on Oracle ORCL.
At the start of 2022, Collins saw short term opportunity in Oracle’s near-two month long slump. Why? In a very real sense, it was the slump itself.
“With exhaustion often come bounces,” Collins wrote recently on Real Money. “Don’t mistake a bounce for a complete reversal in sentiment. There is a short-term opportunity for traders. However, I won’t declare the bottom is in place. Instead, we’re looking for a bounce back into the $90 to $91 range.”
In other words, sometimes a stock can get oversold even if it is in the middle of a correction. Traders can sell, buy after a period of significant sales, then resume selling as they settle in on a new price point. It doesn’t always work out that way, but when that bounce happens, a quick trader can profit.
Collins noted, “both the Full Stochastics and MACD indicators are heavily oversold but turning higher.” In addition “we don’t have the 21-day or 50-day simple moving averages (SMA) sitting as resistance. Should ORCL close back under $87, I would be slightly concerned. If we close under $86, then the bounce idea is dead. Take the loss and move on.”
