Is A Price Increase In The Cards For Oracle? | July 17, 2008 | By Casey Murphy

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Is A Price Increase In The Cards For Oracle?

July 17, 2008 | By Casey Murphy

Uptrends and downtrends are hot topics among technical analysts and traders because each participant wants to ensure that the underlying direction of the trend is working in favor of his or her position, rather than against it. Trendlines are the easily recognizable lines that traders draw on charts to connect a series of prices together. The resulting line is used to give the trader a good idea of the direction in which a current position might move.

One of the primary reasons trendlines are so popular is because they can help a trader identify levels on a chart beyond which the price of an asset might have a difficult time moving. Predicting areas where a stock might find support can be very useful for traders looking for strategic entry positions and it can also be an effective tool for managing risk. A trendline that will act as a barrier to a move lower, known as a level of support, is created by connecting a series of lows.

As you can see from the chart of Oracle Corp. (Nasdaq:ORCL), the bears have sent the price toward the ascending trendline several times since 2006. Many active traders will pay specific attention to this stock because it has presented an excellent buying opportunity each time that the price has fallen near the trendline. Specifically, notice how the price has bounced off the support level several times in the past. This is the type of movement that many traders are hoping will happen again. It wouldn't be surprising to see traders protect their positions by placing a stop-loss order several percentage points below the trendline.