What the Charts Portend for Oracle
06/26/2013 7:00 am EST
This tech giant's stock has dropped over 10% last week after missing analysts' expectations for the second straight quarter, and Corey Rosenbloom of AfraidToTrade.com looks at what the technical studies are now showing.
After a stellar price drop and reversal on two sharp downside gaps, Oracle (ORCL) shares face a major "make or break" challenge of a visual chart-based support level.
Let's take a look at the daily and then weekly picture to highlight this level for strategy planning:
Without getting into too much detail, buyers and sellers face a major support challenge at the current $29.50 per share level.
Not only is it the 61.8% "last line" Fibonacci retracement, but it's also a price polarity level as we'll see shortly from the weekly chart.
I highlighted the "neutral" or caution zone between the 61.8% and 50.0% Fibonacci levels, which also reflect prior price reversals-these levels intersect $31.00 and $29.50 per share.
For educational purposes, note how negative and positive momentum divergences in the rate of change (or any momentum oscillator) preceded short-term reversals and retracements along the way.
A breakdown and close under $29.50 opens a "bearish price pathway" that extends all the way back to the $25.30 level last seen during a "double bottom" pattern in 2012.
Until we do see a support breakdown, we'll be cautiously watching for any sign of a 'bounce' off critical support.
The support level extends the perspective on the weekly chart:
I mentioned the $29.50 per share area as a "polarity" level or a level that historically has held as both support and resistance (on short-term reversals from this level).
We see this occurring since 2010 in Oracle (ORCL) shares as price again challenges this key inflection level.
As followers of price, we look for buying and selling (bull/bear) activity to drive price away from a key level, and we build trades based on the movement or 'pathway' of price.
A breakdown suggests a sustained move away from $29.50 toward $26; a support bounce argues for a move 'away from' $29.50 and toward $32 or $33 for a minimum 'pathway' target.
Continue monitoring real-time price action relative to the $29.50 key inflection or pivot price level.
By Corey Rosenbloom, CMT, Trader and Blogger, AfraidToTrade.com