ORACLE SHARES PULLING BACK TO NICE ENTRY POINT FOR THE BULLS

Oracle Corp.

shares rose nearly 20 percent off the October lows before topping out short-term at $42.81 on November 28th. The pullback in prices since the peak was made has retraced almost a perfect 38.2% on the daily chart. So, is the floor for this down move in ORCL in place? Or, is there more pain to be felt by the bulls? Do the fundamentals act as a headwind or tailwind in the case of Oracle? Let's take a look… What the bulls see in ORCL… • A modest 1.1% dividend yield – but with only a 20% dividend payout ratio (indicating the company can move their dividend up significantly at any point) • A reasonable price-to-sales of 4.69 • Great net profit margins of 28.44% that create over $12.03 billion in levered free cash flow annually • $51.62 billion in cash versus $32.57 billion in debt is a beautiful thing • Debt to equity of 67.95% and a current ratio of 4.35 are both solid What the bears see in ORCL… • Tepid estimates for 2015 (4.2% revenue growth and 7.9% EPS growth) that make the surface P/E of 12 appear not so cheap • A market capitalization of $178.54 billion that easily trumps the enterprise value of $161.6 billion – not cheap • An expensive price-to-book ratio of 3.82 The technical outlook for ORCL… Technicians note that Oracle Corp. shares should have support at $39.95 – the 38.2% Fibonacci retracement of the October to December rally. That level also corresponds well with the November 12th and 13th pivots – which create a horizontal line of support. Assuming those levels hold, a run up to the previous highs at $42.51 and $43.19 would be a strong possibility. If those levels break, the upper edge of the long-term uptrend channel does not come into play until around $50. Overall… ORCL shares can be accumulated at or near one of the Fibonacci retracements (of the October to December rally) for a trade up to the highs. As always honor a stop loss discipline should the nearest support fail to hold up after you buy the shares.