Shares of software giant Oracle Corporation (NYSE:ORCL) tumbled following the company’s latest earnings report in mid-September. As a result, ORCL stock once again has arrived at critical support. A weekly or monthly close below here could be an intermediate-term game-changer for Oracle shares.
When looking at any asset — be it a stock, bond or currency — you need to look at more than relative price performance over multiple time periods. You also need to get a good idea of relative performance versus other assets within and outside of the asset class.
When I apply the relative analysis to ORCL stock, I see notable underperformance versus North America tech software companies, as represented by the iShares S&P NA Tec.-SW. Idx. Fund (ETF) (NYSEARCA:IGV). That’s despite the fact Oracle stock, at 8.2%, is the ETF’s third-largest holding.
In simple number terms, the IGV ETF is higher by about 9% year-to-date while Oracle stock has rallied about 6.8% so far.
ORCL Stock Charts
If we look at the charts, we see that Oracle stock formed a noteworthy intermediate-term top in late 2014 and first-half 2015. This might turn out to be a longer-term top should the chart deteriorate further in coming weeks/months.
While ORCL stock still is up for the year, it has mostly trotted sideways since late March. This is in stark contrast to the IGV ETF, which has continued to ascend for most of the year. The IGV also has far eclipsed its 2015 highs, and thus in relative terms has outperformed ORCL stock.
On the multiyear chart, we see that Oracle broke below its 2009 support in summer 2015, and it remains below this line. While ORCL stock managed to climb back above its blue 17-month moving average this year, it once again is threatening a break below. The 17-month moving average can be a good barometer for a stock’s intermediate to longer-term trend.
Each stock and asset tends to react better or worse to different moving averages at different points in time. However, the 200-day moving average at the margin tends to get somewhat more respect than many other moving averages.
Case in point: ORCL stock since early 2015 has shown a great deal of respect for its red 200-day MA, which off and on has acted as well-defined support and resistance.
Following the September earnings report, Oracle stock once again dropped down to this moving average and is now testing it as support for the second time since this summer.
A weekly and monthly close below this moving average — currently near $39 — could see another leg lower in ORCL stock with a next stop in the $36-$37 range.
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