It's been a stellar year so far for Oracle (ORCL) -- shares of the $150 billion database software giant have rallied more than 21% since the first trading day in January. But the same can't be said for the last couple of months: Oracle has stumbled around 8% from its highs back in September. And now, shares look likely to continue their orderly decline.
That's because Oracle is currently forming a head and shoulders top. The head and shoulders is probably one of the most well known technical setups out there; it's formed by two swing highs (the shoulders) that are separated by a higher high (the head). The sell signal comes on a move through the neckline level. Despite the popularity of the pattern, it still works: a recent academic study conducted by the Federal Reserve Board of New York found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in "profits [that] would have been both statistically and economically significant."
Ultimately, ORCL needs to break the neckline for the sell signal to trigger, but even in the best case, this stock has switched from moving higher in an uptrend to slugging lower in a downtrend. Either way, this isn't a stock that looks attractive to own right now, and momentum has indicated that since the uptrend broke back in early September. Opportunistic buyers should wait for a change in trend before putting their money on the line.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV