ORCL reported disappointing earnings after the Close on June 17th. The next morning it traded lower before rallying back $2 with the market. I had two reasons why I thought it would roll over again the next day. One, I believed the large market rally the prior day was the primary driver of its bounce from 41 to 43. Two, after large funds had a chance to digest the earnings release which showed disappointing subscription numbers they would sell, because SAAS is the only major catalyst for ORCL at this point which I am aware.
The above graphic is from the pre-market game plan I write out each day so it is easier to follow along during our AM Meeting. I entered short just below 43 on the Open with downside targets of 42 and 41.60. The price action confirmed my thesis at 10AM when sellers quickly pushed it from above 43 to below the opening low. I am currently still short and would look to add to the position on the Open Monday if it traded up to 42. If you are interested in why I shorted Netflix as well the post is here.
Steven Spencer is the co-founder of SMB Capital and SMB University which provides trading education in stocks, options, forex and futures. He has traded professionally for 18 years. His email address is: [email protected]
Steven Spencer is currently long BABA, KING, LOCO, MNKD, OHRP, TWTR, WMT and short NQ, ORCL