There is a heavy cloud hanging over the tech sector lately. Leadership from FAANG stocks isn’t what it used to be, the government is looking into legislation on social media companies, and chip stocks are getting frothy. There is even concern rising over cloud companies like Oracle (NASDAQ:ORCL).

For ORCL stock traders, this malaise comes at a bad time. Oracle is set to report earnings on Monday, Sept. 17, and Oracle stock is at a critical point ahead of this event.

Overall, ORCL stock hasn’t been kind to investors in 2018. The shares are up only about 2% on the year. Lately, the stock has bounced between support at $47 and resistance near $49.50. Still, Oracle stock is trading sharply higher from it’s June lows — but that’s little consolation.

 Right now, ORCL stock is struggling to maintain support at its critical 50-day and 200-day moving averages. This pair is poised for a bullish cross, called a “golden cross” by technical investors. While this would typically be a “buy” signal for technical traders, ORCL stock is showing weak price action lately, brought on by broader concerns in the technology sector as a whole.

The company could shake off these fears with its coming quarterly earnings report. Analysts are expecting Oracle to post a profit of 69 cents per share, up from 62 cents last year. Revenue is expected to rise a mere 1.1%, however, to $9.31 billion.

Sentiment is largely positive among the Wall Street ratings firms. For instance, EarningsWhispers.com puts the whisper number at 71 cents per share. Additionally, 26 of the 36 analysts following ORCL stock rate the shares a “buy” or better.

However, ORCL stock doesn’t have a good post-earnings track record. The shares have averaged a 6% post-earnings move in the past eight quarters. But in six of those quarters, that move has been to the downside.

Options traders are also rather upbeat on Oracle stock. Currently, the September put/call open interest ratio rests at 0.67, with speculative traders expressing a clear preference for calls.

Additionally, September implied volatility is pricing in a post-earnings move of about 5.72%, which is just below ORCL stock’s average move of about 6% in the past eight reporting periods. This puts the upper bound for a post earnings move near $50, and the lower bound near $45. Both extremes are outside of ORCL’s current trading range, indicating a breakout for the shares.

2 Trades for ORCL Stock

Put Spread:  Despite the somewhat positive sentiment backdrop and the potential for a “golden cross,” ORCL looks quite vulnerable right now. This is largely due to broader jitters in the tech sector, but any hint of weakness in Oracle’s earnings could be punished rather harshly as a result.

Because of this, traders might want to consider entering an October $46/$47 bear put spread. At last check, this spread was offered at 40 cents, or $40 per pair of contracts. Breakeven lies at $46.60, while a maximum profit of 60 cents, or $60 per pair of contracts — a potential return of 150% — is possible if ORCL closes at or below $46 when October options expire.

Call Spread: The saving grace for ORCL stock here would be a strong quarterly report and solid guidance. Barring a broader decline in the tech sector, such a report should lift ORCL stock out of its recent trading range and send the shares steadily higher.

Traders looking to bet bullish on Oracle stock may want to consider an October $49/$50 bull call spread. At last check, this spread was offered at 39 cents, or $39 per pair of contracts. Breakeven lies at $49.39, while a maximum profit of 61 cents, or $61 per pair of contracts, is possible if ORCL stock closes at or above $50 when October options expire.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.