by Serge Berger | December 23, 2013 8:32 am
Last Friday, corporate enterprise software producer Oracle Corporation (ORCL) announced it will acquire software company Responsys (MKTG) in a $1.5 billion deal that values its shares at $27. With this acquisition, Oracle is likely looking to compete against competitors such as Salesforce (CRM).
Last Wednesday after the close of trading, ORCL reported its fiscal second quarter earnings. The company came in with earnings per share of 69 cents versus the estimated 67. EPS were higher by 8% year-over-year, and revenue came in at $9.28 billion — better than the estimated $9.18 billion. On the top-line front, sales were reported 2% higher versus the same quarter one year ago.
But what seemed to get analysts’ juices flowing were Oracle’s sales statistics around its cloud software, which was higher by 35% in the second quarter. ORCL also forecast better sales for the current quarter than what analysts were expecting.
As a result of the good earnings and forecast, ORCL stock rose almost 5.8% on Thursday, pushing it to a fresh thirteen-year high. On the charts, the move was equally significant in both the long- and near-term time frames.
The weekly chart of ORCL, looking back to 2011, shows a stock that has found important resistance in recent years around the $36.40 area but at the same time developed a good series of higher lows. Last Friday’s push to a new multi-year high thus qualifies as the beginning of a higher high, and considering the multi-year formation or higher lows, those highs likely have plenty more to rally before a more meaningful pause sets in.
On the daily chart, note how ORCL’s 50-, 100-, and 200-day simple moving averages have all traded closely together since May, and proved a great support level during last week’s selloff. Interestingly enough, ORCL stock began moving higher last week before its earnings report late Wednesday. But the big move came on Thursday, which resulted in a meaningful up-gap at the open and close at fresh year-to-date highs, past the resistance line that I outlined on the above chart.
While the stock could be somewhat overbought in the immediate term, given last week’s violent pop in the stock, the directional momentum remains on the side of the bulls, and any consolidation in the stock here is better bought than sold into. As a next upside target, ORCL could move towards the $39 mark.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
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