Oracle Corporation (ORCL) Stock Goes From Bad to Worse. Short It.

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The forecast continues to look chilly for Oracle Corporation (NYSE:ORCL) both off and on the price chart. And for investors seeing further downside in Oracle stock’s future, a long put strategy looks built for the occasion. Let me explain.

Oracle Corporation (ORCL) Stock Goes From Bad to Worse. Short It.

Over the past couple weeks things have gone from bad to worse for ORCL stock. Some of Trump’s anti-Silicon Valley agenda might, off the cuff, be thought as a prime suspect. However, the reality is the Oracle price chart doesn’t support those concerns.

In the immediate aftermath of the Trump victory, ORCL rallied while large cap peers like Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) got hammered.

But since Dec. 1, the trading in Oracle stock has become decidedly Grinch-like. That day shares of ORCL stumbled nearly 4%. The irony is an investor would have to be an Oracle to figure out a catalyst for the bearish move. Trust me, I tried.

Then there’s Oracle stock’s recent earnings disappointment from late last week. And trust me, you don’t have to be a wizard of stock market logic to figure out what went wrong.

Oracle’s corporate confessional met Street profit views of 55 cents, but saw investors fleeing this past Friday as Oracle doled out light revenues.

Particular disappointment came from the company’s lackluster sales growth within its cloud business which competes against Amazon. CEO Larry Ellison had previously promised investors Oracle’s offering would displace the tech disruptor’s service.

Following the report Oracle stock gapped and sank by 4% to finish near session lows. Worse yet for trendline watchers, ORCL shares broke both 50 and 200-day simple moving average supports as part of that day’s technical weakness.

Bearish contrarians might also appreciate ORCL’s price action flies in the face of Oracle cozying up to the incoming Trump administration. As part of the earnings festivities, Co-CEO Safra Catz announced her acceptance of a role within the executive committee of Trump’s transition team.

Now, one longstanding and key Oracle staffer has walked the walk in resigning from Oracle in protest of Ms. Catz’s move. At the same time, bears also appear to be resigning themselves to walking the walk in Oracle stock.

Oracle Stock Daily Chart

 

12-21-16-orcl-stock-chart
Click to Enlarge
Source: Charts by TradingView

All markets correct, of course. But our technical assessment is ORCL stock hasn’t finished being dragged through the proverbial mud. It’s our view Oracle shares are actually readying for lower prices as we enter 2017, rather than setting up as a bullish “catch-up” trade tied to its current relative weakness.

My bearish conclusion is supported by a price chart that’s looking more and more like a bearish head and shoulder top or a failing double bottom pattern. Choose your poison, but either portrait should provide downside momentum and profits for bearish Oracle stock traders.

Oracle Stock Bearish Strategy

Option premiums are fairly cheap and given our view of lower prices in Oracle stock, an out-of-the-money long put becomes more attractive.

A combination of leverage-for-less and limited risk in the event we’re wrong; are good supports for buying a long put. Reviewing the ORCL options board, the Feb $37 put is one candidate this strategist likes. Priced for 43 cents with Oracle stock at $38.90, the $37 put is stationed slightly below pattern support, which as discussed, we anticipate will fail. Also, by using February the trader is giving the ORCL put sufficient time to work.

If shares of ORCL do begin to move lower, selling an offsetting put or puts to design an even lower or no-risk trade, is how I’d approach managing the position.

Alternatively, should the ORCL stock chart fail to cooperate, risk is contained to the small debit paid. Using a 50% money stop, if the undesirable occasion arises, also puts cents in the pocket of this bearish trader wanting to contain the modest loss further.

Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.

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The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2016/12/oracle-corporation-orcl-oracle-stock-price-bears/.

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