Oracle Corporation (ORCL) is a longstanding California based software, database management and enterprise services provider, and currently the world’s second largest software producer by total revenue. As of this post (12:20PM CST) ORCL is currently trading up 0.82% to 40.97. The stock remains in the upper portion of its 52 week range of 33.70-43.19, and has begun to pull back off of 42.00 resistance on the daily chart after failing to re-test the year’s highs that were printed back in late June. ORCL is currently set to report earnings today, 12/17/2014 after the market close.
Over the last eight quarters of earnings data available, ORCL has traded mostly bearishly, moving lower on five out of eight sessions immediately following the EPS release. Historical volatility in ORCL has been relatively modest on these post-earnings moves, averaging approximately 4.7% during this time period. Currently the options market is pricing in a slightly larger than average directional move of approximately 5.95%, or roughly $2.40 in the underlying stock by this Friday’s monthly option expiration on 12/19. Although ORCL is currently above the Ichimoku Cloud on the daily chart, the stock remains in a downward consolidation pattern and has been unable to hold convincingly over 42.00 resistance or the relevant moving averages. Coupled with Oracle’s recent propensity to trade lower following earnings, including selling off each of the last three consecutive quarters, I will be looking for a continuation in the bearish trend and looking to get short this name into today’s earnings release.
Trade: Buying the ORCL Dec 40-39 Put Spreads for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot