Oracle's (ORCL) stock faced a significant decline on Tuesday. The company reported fiscal second-quarter adjusted earnings that failed to meet Wall Street's expectations and provided weak guidance amid the intensifying competition among cloud services providers. Since the beginning of the year until Monday's close, the AI narrative surrounding Oracle had driven its stock to rise by more than 80%, outpacing the Nasdaq's 31% return over the same period. Since late June, Oracle shares have been trending upward within a rising wedge pattern on the chart, which typically indicates a potential downside reversal upon a breakdown. More recently, the stock reached a new record high on Monday but then experienced a dramatic intraday reversal with above-average volume, closing lower for the day and forming a bearish dark cloud cover candlestick pattern. On Tuesday, the stock gapped below the wedge's lower trendline, potentially triggering further earnings-related selling. The first support level to keep an eye on is around $177, which is currently just below the 50-day moving average (MA). This price point could offer support near the upper range of a narrow consolidation period that formed on the chart throughout most of October. If the stock sells below this level, it may decline to the $165 level, where buying interest could be attracted near the trough of a minor pullback that occurred in late September. A decisive breakdown below that price sets the stage for a potential retest of lower support around $145. Bargain hunters might look for buying opportunities in this region near the closely watched 200-day MA and several peaks that emerged in June and July.
Oracle Stock's Plunge and Key Support Levels
Oracle's Stock Performance and Earnings Disappointment
Oracle's stock had been on a remarkable upward trajectory since the start of the year, driven by the AI narrative. However, the company's fiscal second-quarter adjusted earnings came in below Wall Street expectations, sending shockwaves through the market. This unexpected turn of events led to a significant sell-off in Oracle's stock on Tuesday. The gap below the rising wedge's lower trendline further adds to the bearish sentiment surrounding the stock.
The AI-driven rally that had propelled Oracle's stock to new heights now seems to be losing momentum. Investors are closely watching the support levels to determine the next course of action. The $177 level, just below the 50-day MA, is likely to be a crucial battleground. If the stock can hold above this level, there may be a chance for a recovery. But if it breaks below, the path could lead to further declines towards the $165 and potentially even the $145 level.
The Significance of Chart Patterns and Moving Averages
Chart patterns play a vital role in technical analysis, and the rising wedge pattern seen in Oracle's stock is a clear indication of a potential trend reversal. As the stock climbed to a new record high on Monday and then reversed sharply, it formed a bearish dark cloud cover candlestick pattern. This pattern suggests that the upward momentum has been exhausted and a downward move may be imminent.
The 50-day moving average and the 200-day moving average are also important indicators for investors. The 50-day MA currently acts as a resistance level, while the 200-day MA is a significant long-term support level. The stock's interaction with these moving averages will provide valuable insights into the future direction of the stock. If the stock can stay above the 50-day MA and find support near the 200-day MA, it may indicate a more stable market environment.
Support and Resistance Levels and Buying Opportunities
The support levels identified in Oracle's stock are crucial for investors looking to make informed decisions. The $177 level near the 50-day MA provides an initial level of support. If the stock manages to hold above this level, it could indicate that the selling pressure is easing and a bounce-back may be on the cards. However, a break below this level could lead to a more significant decline towards the $165 level.
At the $165 level, there is a potential for buying interest to emerge as it接近 the trough of a minor pullback in late September. This could present a buying opportunity for bargain hunters. Additionally, the $145 level near the 200-day MA is another key support level. If the stock reaches this level and finds support, it may attract long-term investors looking for value. However, a sustained breakdown below this level could raise concerns about the long-term health of the stock.
