Software giant Oracle Corp. (ORCL) got booted from the tech-heavy Nasdaq-100 index in July 2013 when it defected to the New York Stock Exchange, replaced by Tesla Inc. (TSLA). The stock has fallen off the radar of many index-obsessed market players since that time, which is a shame because it recently broke out above a major trendline and could head much higher in coming months.
The stock tends to swing through smaller weekly and monthly ranges than the majority of its big tech rivals, with 4.1-billion total shares and a 2.98-billion float lowering volatility levels. While the fast-fingered trading crowd might avoid exposure due to this dampening influence, it also lets shareholders sleep at night, unconcerned the bottom might drop out after a downgrade or profit warning.
ORCL Long-Term Chart (1993–2017)
A multi-year uptrend topped out at 70-cents (post five splits) in 1990, giving way to a broad decline that found support at 12-cents a few months later. It took two years for the subsequent bounce to reach the prior higher and break out, triggering a powerful trend advance that accelerated at the start of the new millennium, lifting the stock to a new high at $46.47 in August 2000.
An 8-month topping pattern broke to the downside three months later, triggering a persistent downtrend that continued for nearly two years, dropping the price to a 3-year low in single digits in October 2002. It underperformed the broad tech universe into 2008, lifting into the mid-20s in a shallow rising channel that stalled at the .386 Fibonacci bear market retracement level. The stock nearly got cut in half during the economic collapse, bottoming out at a higher low in the low teens, ahead of a bounce that completed a round trip into the prior high in August 2009.
It broke out into 2010, entering a strong uptrend that reversed in the mid-30s one year later. It took another two years to return to that resistance level, ahead of a December 2013 breakout that topped out at $46.71, just 34-cents above the 2000 high. Price action has held within the trading range of the last rally wave for the last 26-months, grinding out a possible handle in a multi-decade cup and handle breakout pattern.
ORCL Short-Term Chart (2014–2017)
The stock lost ground throughout 2015, descending in multiple waves that tested long-term support at the 2014 breakout in January 2016. Buyers returned at that level, triggering a steady recovery that reached the trendline of declining highs in December, ahead of a February breakout that’s testing the .786 selloff retracement level. The 50- and 200-day EMAs have now risen into alignment with trendline support, telling us a pullback into the $40 to $42 price zone should offer a low-risk buying opportunity.
More importantly, the next rally into the mid-40s will complete the massive cup and handle pattern, predicting an eventual breakout that reaches the 70s as a measured move target in coming years. However, it isn’t wise to take that long-term exposure now because the stock still faces multiple resistance layers generated by the 2-year correction. As a result, the best strategy is to get this ticker onto a long-term watch list and check its progress at regular intervals.
On Balance Volume (OBV) peaked in the first half of 2014 and ground sideways, testing the prior high in the middle of 2015. It then entered an aggressive distribution phase, dropping to a multiyear low at the start of 2016. Accumulation since that time has drawn a stair-step appearance, with the indicator still well below the prior peak. This signals constructive action while telling us the stock needs more time to restore its bullish luster.
The Bottom Line
Oracle is making progress in building new sponsorship after a major correction and should eventually return to the 2014 bull market high, completing a multi-decade breakout pattern that predicts much higher prices. However, there’s no rush to take exposure because that buying impulse could take months to develop. In the meantime, a pullback to new support between $40 and $42 should offer short-term market players with a low-risk buying opportunity.
<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>