PreMarket Prep Stock Of The Day: Oracle

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Over the many years of observing stocks following earnings reports, there are certain trends that seem to persist over time. Nothing is 100% reliable, but these seem to occur more times than not.

One of those observations is that Oracle Corp ORCL will retreat following its earning reports, and then, more often than not, will regain its footing and rally back. With that concept in mind, it is the PreMarket Prep Stock of the Day.

One Example: At least some investors were employing this concept heading into Oracle’s fourth-quarter report back in June. Six days prior to its report (June 8), the issue made a new all-time high at $85.02 and posted its all-time closing high that same day at $84.61.

Profit-takers came into the issue following that peak, nudging the issue to $81.64 on the trading day in which that company reported after the close (June 15).

It's hard to find what the Street did not like about the report, as the issue beat EPS by 24 cents and for revenues by $190 million. 

Following a much lower open ($77.99 vs. $81.64), it had a brief rally and then resumed its move lower. The issue eventually bottomed at $75.90 and ended the session lower by $4.58 at $77.08. 

Oracle's Double Bottom And Rebound: One day removed from its earnings beatdown, the issue once again found buyers under $76 and put in place an almost exact double bottom.

The explosive rally off those lows did not culminate until its all-time high was made Aug. 17 at $91.78, and Oracle posted its all-time closing high that day at $90.95 as well.

Mild Profit-Taking, Consolidation In Oracle Stock: The issue retreated off that high, and for the most part has been in a trading range from $88 to $90.83 over the last 17 sessions.

Oracle was closer to the bottom of the range after Monday’s session, making a low at $88.23 and ending the day at $88.89.

Oracle's Mixed Q2 Report: After the close Monday, the company reported quarterly earnings of $1.03 per share, which beat the analyst consensus estimate of 97 cents by 6.19%. Yet quarterly sales of $9.7 billion missed the analyst consensus estimate of $9.77 billion by 0.72%.

ORCL Price Action: Similar to the price action after its fourth-quarter report, the issue had a much lower open ($86.19 vs, $88.69) and had a brief rally to $86.95 before continuing its move lower Tuesday.

As of 11:30 a.m. EST, it has reached $84.73 and rebounded back into the mid-$85 handle. That low coincides with its July 8 low ($84.55).

Oracle Moving Forward: Considering the velocity of the issue's rally following its fourth-quarter report, it has created a void of significant support levels to lean on. For example, if the current low is breached, the next daily low is not until its July 7 low ($82.96). Also, the company’s first-quarter report was nearly as impressive as its prior one.

Nevertheless, if Oracle can test the current low and put in yet another double bottom, it just may have a repeat performance from last quarter and return back to all-time high territory.

The full discussion on Oracle from Tuesday’s show can be found here:

Disclosure: Dennis Dick is long shares of Oracle Corp.