OTEX a possible Oversold Reversal play

[Pascal]

OTEX came up in my list of stocks to short. However, the stats data to short OTEX did not produce anything interesting, mainly because OTEX has been in a long uptrend. It is true that the uptrend seems to be broken, but an oversold bounce could appear especially if the market reverses up.

I do not expect the market to bounce from an oversold level today. Hence, this is a trade idea that we need to keep in mind for the next days.



The Pyramid data shows a very negative environment.



We can see that volume was very high yesterday.



The first idea here is to test a breakdown on volume (Short trade below $52.3)
The data below shows that in the past 500 days, this type of trade has just produced breakeven returns.



However, buying an oversold situation has produced better returns.



We can see below that the "oversold" conditions for OTEX can be very wide: between $51.79 and $49.66.
Also, it is not because we reach the Oversold buy zone that it is safe to buy, because an oversold situation can easily be more oversold.

In order to buy, it is important to detect a reversal. For example, if the OTEX falls below $50.46 down to $50.19 and then reverses back above $50.46, then it might be interesting to buy it on the way up.

Another common entry is to buy it after the stock clears the low of the previous day on the way up.
In our case, the Low of the previous day is $52.38.

Please keep this possible trade in mind for an execution when the general market bounces.