Over the last week, we have seen many of the beaten down software giants come back to life. Some of you may have dabbled in them multiple times, riding the daily waves of volatility. To those of you that have, I salute you. We have shared ideas concerning the highly volatile software sector with Pro subscribers with some success, so why not stick with what’s working. We have talked about how to trade the falling knife in the overall sector – the iShares Expanded Tech-Software Sector ETF (IGV) . Then, after a much needed relief rally, we pivoted to a short idea in AppLovin (APP) that provided an optimal risk/reward entry. Today, we go the other way and look at a long idea that still has momentum and a good risk/reward setup: Oracle (ORCL) . The stock has rallied 29% week to date; we clearly missed the low. However, for the swing trader and even that longer-term trader waiting for a safer entry point we think we found it. The setup The stock had dropped 60% from its September peak. It had several quick but unsustainable rallies along its precipitous decline. Each one failed to sustain momentum or clear its 50-day moving average — until now. Shares have finally formed a formidable bottom at the $135 level. There were signs the bottom was starting to form when a bullish divergence in its relative strength index, or RSI, started taking shape on its last decline. As shares retested its lows, the RSI made a higher low. Most importantly, it broke its downtrend with some gusto. The rally off the lows with strong volume saw the price jump above its 50-day moving average. It gapped higher again to confirm the breakout and provides us with great areas of support and resistance so we can trade with a tad more clarity. The trade Do we chase? That’s the question traders keep debating and the answer is yes. The biggest rallies occur under the 200-day moving average and we are in the midst of one now. Look for shares to continue their climb, maybe not at this precipitous pace, but climb nonetheless and rally back to its 200-day moving average, around $215. That targeted level also coincides with its anchored volume weighted average price (AVWAP) from its September peak. Expect the stock to struggle to eclipse that mark when reached and take profits if it gets there. Then we can reevaluate the trade and see if the stock has any chance to regain its old form. We saw that textbook technical behavior in AppLovin — a reversal with momentum that rallied back to a key average and failed. Risk management With stocks on the move, we must always determine our risk parameters. Use the gaps as guides. As price pulls back you want to see them hold and act as support if tested. We have a few clear areas to watch if this trade loses momentum. If you have a low pain threshold or are a more aggressive trader then use the $172 level as a selling point. Old resistance should be support on a quick trade. For those that can withstand the wilder swings and worry there may be a deeper pullback, use the initial gap at $160 as a stop. If you are correct, then use the 50-day moving average as your guide as that dip should be bought. The reversal appears real and is confirmed to us on a longer time frame. The long term When you back to stock out to a five-year weekly chart, that’s where you can see the significance of this move. Shares held the 200-week moving average. This average hasn’t been breached by more than three weeks going back decades. It also confirms a solid floor has been established and we can manage risk well from here. We also see we have more to reverse. The long-term potential reward is still favorable even though it feels as if we may have missed a nice chunk of that move. We also have a significant moving average convergence/divergence (MACD) buy signal that has proven to be correct in the past. It’s too good to ignore. When you put it in perspective, this is one of those situations where we may look back at the chart and see this significant gap and reversal in a trend and wish that we bought that. Right now we’re not thrilled that we may have missed the bottom, but from a technical standpoint and a risk/reward point of view, there’s still money to be made here and maybe, just maybe, the worst is over for Oracle. — Jay Woods, CMT with Chase Games DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. 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