Oracle (ORCL) Trading Lower After TikTok Download Ban

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Oracle (ORCL) Trading Lower After TikTok Download Ban

Oracle Corporation (ORCL) is trading lower in pre-market trading on Friday after the United States Commerce Department issued a ban on TikTok and WeChat downloads, effective Sunday, and is ordering Dow component Apple Inc. (AAPL) and Alphabet Inc. (GOOGL) to remove the apps from their respective stores. It’s unclear if the disclosure is a negotiation ploy ahead of the deadline to finalize an ownership arrangement or a definitive solution.

Key Takeaways

  • The Commerce Department of the United States has prohibited the download of TikTok and WeChat applications.
  • It is unclear if the announcement will put a halt to Oracle’s campaign for American control.
  • To maintain the positive technical picture, Oracle stock must remain in the $57 to $57.50 price range.
  • If a compromise is reached, long-term tendencies imply only modest gains.

Oracle stock dropped approximately 3% on the announcement and is now trading near a weekly low, with uncertainty prompting many speculators to give up and go away. The stock is currently holding Monday’s breakthrough in the lower $60s, but that might change following President Donald Trump’s remarks later today. According to Commerce Secretary Wilbur Ross’s subsequent statements, the president may just “kick the can” till after the November election.

Oracle shares peaked at $60.50 in July 2019, fell to the $30s in March 2020, and then recovered roughly 1.5 points above that level once the TikTik acquisition was announced. For the previous week, the stock has been hanging just above resistance, waiting for favorable news to finish the breakout. A permanent embargo imposed by the US government might drive another batch of stockholders to jump ship, resulting in a failed breakout, the following stage in a bearish double top pattern.

  Trading Is Timing

Last week, the business topped top- and bottom-line first-quarter 2021 projections, but sales increased by just 2.0% year over year, prompting a sell-the-news response. Cloud applications generated favorable quarterly results, but bulls are hoping that the TikTok app can boost the company’s sluggish revenue growth. As a consequence, Oracle is more vulnerable to deal failure than Dow component Microsoft Corporation (MSFT), which increased sales by more than 12% in the most recent quarter.

A double top is a very negative technical reversal pattern formed when an asset hits a high price twice in a row with a minor decrease between the two highs. It is verified when the asset’s price falls below a level of support equivalent to the low between the two previous highs.

Oracle Long-Term Chart (2000 – 2020)

TradingView.com

A multi-year uptrend accelerated into a parabolic surge in 1999, eventually peaking at $46.47 in the third quarter of 2000, before descending into a bear market that found support around $7.25 in 2002. In 2015, the ensuing rise completed a round trip into resistance, resulting in a 2017 breakthrough that halted just over $60 in 2019. The stock challenged fresh support twice in 2018, and again in March 2020, contributing to long-term shareholders’ poor returns.

Over the last decade, price activity has followed a wide rising channel pattern, with support tightly aligned with the 50-month exponential moving average (EMA).In the last 11 years, the stock has challenged the moving average at least ten times, suggesting significant downswings that have eroded investor patience. The post-news rally paused fewer than three points below channel resistance, suggesting that positive news regarding TikTok would not result in many points of gain.

  Using Moving Averages to Trade the VIX

On the other hand, additional unfavorable news in the near term is expected to close the September 14 gap between $57.50 and $59.50, challenging the intermediate breakthrough above the July high of $57.29. The technical picture will not worsen as long as price movement remains on the trading floor. Just bear in mind that the stock closed at $57.00 following Friday results, prior to Monday’s TikTok announcement, and a selling impulse below that level would very certainly result in a significant cluster of stop losses.

A price channel occurs on a chart when the price of a security is confined by two parallel lines. The channel may be classified as horizontal, rising, or descending depending on the trend. Price channels are often used by technical analysts to measure the momentum and direction of a security’s price movement and to identify trading channels.

The Bottom Line

Oracle stock is down on Friday morning after the Commerce Department prohibited TikTok and WeChat downloads.

Disclosure: At the time of publishing, the author had no investments in the aforementioned securities.

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