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MOVING AVERAGES


Oracle Turned Back At Gap

01/12/06 09:01:44 AM
by Arthur Hill

Oracle surged at the beginning of January, but failed in the gap zone and currently remains just short of a breakout.

Security:   ORCL
Position:   Hold

On the daily chart (Figure 1), Oracle (ORCL) gapped down in September and consolidated the last few months. The gap signals a sharp shift in investor/trader attitudes and should be considered bearish as long as it remains unfilled. The bears made a statement and it is now up to the bulls to prove that statement wrong. The early January surge filled most of the gap, but fell short of a complete fill and more work is required.

FIGURE 1: ORACLE, DAILY. ORCL gapped down in September and consolidated the last few months. Can we expect gains anytime soon?
Graphic provided by: MetaStock.
Graphic provided by: MS QuoteCenter.
 
Oracle is also finding it difficult to break free of two key moving averages. The 50-day simple moving average (SMA) and 200-day SMA are both between 12.5 and 13. The 50-day SMA covers the short- and medium-term trends, while the 200-day SMA covers the long-term trend. The stock has been moving above and below these two key moving averages since late October and has yet to establish direction. There are no real signals from these crossovers, they just reflect current indecision. More telling, the 50-day SMA is trading below the 200-day SMA and this gives the stock a bearish bias.

Despite lack of direction and a bearish bias, Oracle has managed to hold support around 12. However, it is important to wait for a breakout in both the stock and the moving averages. The stock needs to move above its January high (13.15) to break the three- to four-month impasse, and the 50-day SMA needs to move above the 200-day SMA. The 50-day SMA crossed below the 200-day SMA in late October and remains below. A bullish crossover would signal an upward shift in prices and I would then expect further gains.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
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Date: 01/14/06Rank: 4Comment: 
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