Oracle's Chart Setup
Oracle (ORCL) got hit by a wider software slump, but it has held up better than some peers, most notably Intuit (INTU). Adobe (ADBE) reports after the close today, which could give a broader read on the software sector.
ORCL fell sharply from highs near $325 set almost a year ago. The drop took it to 52-week lows near $120, then it climbed back to the $160s. Right into earnings the short-term path slopes up, but the broader trend for most of the year slopes down across the highs. The stock slid after its last earnings report.
The main question for ORCL: can revenue catch up to the heavy capital spending (capex) in the name. Right now ORCL is badly underperforming the XLK tech ETF and sits near the bottom of its group, close to Intuit (INTU).
Key Levels
Horizontal levels: a low at $114.50, a repeated floor near $139, and a high near $171. The price pattern forms an upward channel. The stock trades near its 251-day EMA at about $173, with a cluster of other moving averages just below in the low $150s to high $140s.
The Trade
Looking to November, the expected move is plus or minus about 23.6%. That blue-box boundary lines up closely with a gap in the later highs near $200.
The example trade is a call butterfly on ORCL for November 20/21, strikes near 160, 185, and 200, for a $5 debit. It is bullish and 71 days out.
- Max loss: the $500 debit paid.
- Max profit: if ORCL expires between 180 and 200, giving roughly 1-to-4 risk-to-reward.
- If price goes past 200, the trade keeps a $500 credit.
- Break even: $165, about 3.1% to the upside, easily inside the expected-move range. The $200 upper strike sits right at the edge of that expected move.
This is an unbalanced butterfly, shaped so a winner does not turn into a loser if the stock overshoots to the upside.
