After stopping last month short of resistance in the $41 to $42 area, Oracle (ORCL) declined sharply yesterday and is in a position to test and maybe break the chart support around the $38 level. Let's see if the indicators can give us any clues on whether support will hold or not.
In this daily chart of ORCL, below, we have more bearish clues than bullish ones, in my opinion. Let's start with prices and then look at the indicators. ORCL has been unable to best or break above the $42 level this year. Rallies in March through August have failed to punch through through to new highs. The downside is a different story. In June, ORCL tests and holds the rising, 200-day moving average line just at or above the $38 level. Now shift your attention to October, where ORCL is trading below the rising, 200-day average line and prices pierce the $38 level. Weaker, right?
Now look at the price action off the October lows. ORCL rallies, but stops short of $41 and then turns down to break both the 200-day moving average and the 50-day average line. Prices are trading around $38 this morning, so the jury is out at the moment whether the October lows hold or break.
Meanwhile, the On-Balance-Volume (OBV) line is positive from a January low, but its movement diverges in July and August as the OBV line makes new highs but prices fail to make new highs. This divergence tells me that despite more-aggressive buying, prices could not break above $42. When prices turn lower in September, we see the OBV line decline, suggesting they are liquidating. The trend-following MACD oscillator in the bottom panel is now crossing to a liquidate-longs sell signal. Will the combination of all these signals result in a clear close below $38? We will have to wait and see.
This weekly chart of ORCL, above, is problematic. ORCL is likely to close the week below the rising, 40-week moving average line and may or may not make a weekly close below $38. Forgetting about the short-term jiggles, the weekly OBV line has been declining for most of the past three years. This is not a positive clue. The MACD oscillator is below the zero line and could cross to a new sell signal.
Bottom line: I don't currently see a big downside risk on ORCL. Even if we break the $38 support level we may only see further weakness to around $36 or $35. Not the end of the world, but once prices stabilize again, it may take a considerable amount of time before fresh buying develops.