Oracle Corporation (NYSE:ORCL) is climbing higher on Thursday, although shares have dropped by more then 40% since the beginning of June.
But there is a chance it rebounds from here. It is oversold and at a support level. These can be bullish dynamics. This is why Oracle is the Stock of the Day.
Support is a price level where there is a large amount of demand for a stock.
If a stock is in a downtrend, it’s because there are more shares for sale than there are to be bought. This forces the investors and traders who want to sell to undercut each other to attract buyers.
The dynamic changes when they reach a support level. There are enough buy orders to absorb all of the sell orders. This is why downtrends end when they reach support.
Sometimes stocks rally after they reach support.
This happens when some of the investors and traders who created the support become anxious and impatient. They know that the sellers will go to whoever is willing to pay the highest price.
So they increase their bid prices. Other impatient and anxious buyers see this, and they do the same thing.
This can result in a bidding war or snowball effect that drives the price higher.
As you can see on the chart, the $137 level is support for Oracle. It has been support since February.
Oracle is also oversold. This means aggressive and emotional sellers have pushed it below its normal trading range.
This can draw buyers into the market. They will be anticipating a reversion to the mean or move higher. Their buying could push the price up
The combination of being oversold while at support can set the stage for a rally. There is a chance Oracle moves higher from here.
ORCL Price Action: Oracle shares were up 5.71% at $148.51 at the time of publication on Thursday, according to Benzinga Pro data.
Photo: Rokas Tenys via Shutterstock
