Stocks, sectors, and entire markets often revert to the mean. That simply means that if an asset gets heavily overbought, it will pull back. Or if an asset is oversold, it will outperform and get back to its average over time.
This trend can be used to find short-term opportunities. And for the second quarter of the year, one of the “Magnificent 7” stocks could be a winner here.
The winning Mag 7 stock for the second quarter could be
Tesla Motors (TSLA).
The EV manufacturer fell out of favor with the market in the first quarter. EV sales have slowed. And Tesla’s promised technologies in self-driving and AI tools are taking time to play out.
That helped to drive shares nearly 30% lower. A partial recovery from that drop could mean a big rally higher in the coming months.
Action to take: Shares look oversold in the short-term and ready for a jump higher in the coming weeks.
Tesla has unveiled its latest self-driving technology, which may lead to further upgrades for Tesla vehicles, which could push shares higher.
For traders, the July $190 calls, last trading for about $15.00, could see mid-to-high double-digit returns in the coming months. Traders should look to take a quick profit from a jump higher in shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.