NEW YORK (TheStreet) -- Oracle (ORCL) reports quarterly earnings after the closing bell on Wednesday, and after three consecutive quarterly earnings misses, it may be difficult for the company to keep its shares above the cloud.
Oracle is one of those old technology companies that has had a makeover into a youthful strategy of cloud computing. This simply means that users of Oracle's software are entering their data and processing information onto a bank of servers, trusting that the data will be safe and available for ready access.
As a brand-name old-line tech company, the security and reliability of Oracle's applications shouldn't be an issue. However, good earnings news and guidance just may be priced into this stock after shares set a multiyear intraday high of $43.19 on June 19, just below its tech-bubble high of $46.46 in September 2000.
Analysts expect Oracle to report earnings of 64 cents a share, but a look at the daily chart below shows that downward price gaps occurred on June 20 and Sept. 19, the days following the company's last two quarterly reports.
Let's look at the daily and weekly charts first, and then present the investment profile with exit strategies.
Here is the daily chart for Oracle:
Courtesy of MetaStock Xenith
The daily chart for Oracle ($40.63) shows that the stock held its 200-day simple moving average (green line) on Dec. 12, 2013, then at $33.28, which set the stage for a strong first half this year for the stock. The stock rallied 30% to a multiyear intraday high at $43.19 set on June 19.
Since then Oracle shares have had a bumpy ride.
Oracle missed earnings estimates on June 19, which began the downside for the stock. Missed earnings on Sept. 18 pushed the stock to a 2014 low of $35.82 on Oct. 20, a high-to-low decline of 17%.
Like the market, Oracle has had a strong momentum run-up since mid-October. The stock surged 19% to as high as $42.51 into Nov. 28. Shares of Oracle were below its 200-day SMA between Sept. 23 and Nov. 11, with the stock just above this average, now at $40.36.
Here is the weekly chart for Oracle:
Courtesy of MetaStock Xenith
The weekly chart for Oracle shows that the stock has been above its 200-week SMA (green line) since March 2009 when this average was $17.32.
Investors should be aware that the stock is 72% above its pre-crash of 2008 high set at $23.62 in August 2008. The stock was as low as $13.80 in March 2009.
The weekly chart shifts to negative, given a close on Friday below its key weekly moving average at $40.60, with its 200-week SMA now at $33.68. The momentum reading shown in red at the bottom of the graph is at 77.44, down from 78.67 last week, just below the overbought threshold at 80.
Investors looking to buy Oracle ($40.63) on weakness should enter a good 'til canceled limit order to buy weakness to key technical levels at $38.85 and $34.92.
Investors looking to book profits on Oracle should be aware of technical warnings if the stock closes Wednesday below its 200-day SMA at $40.36 and below its key weekly moving average at $40.60. Investors looking to sell strength should enter a good 'til canceled limit order to sell at key technical levels at $42.25 and $46.60.
TheStreet Ratings team rates ORACLE CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate ORACLE CORP (ORCL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, reasonable valuation levels, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
You can view the full analysis from the report here: ORCL Ratings Report