Oracle Corporation (NYSE: ORCL) is lower on Monday, having lost more than 40% in just two months. But we have made Oracle our Stock of the Day because it may have finally found a bottom. A reversal and move higher may even follow.
Supply and demand drive the stock market. If supply exceeds demand, the price will fall.
As you can see on the chart below, in late September, the sellers took control of Oracle. There wasn't enough demand or buy orders to absorb all of the supply or sell orders.
Traders and investors who wished to sell were forced to offer their shares at a discount to draw buyers into the market. This resulted in a snowball effect that pushed Oracle lower until late November.
Selloffs end or pause when they reach support levels. At these levels, there is enough demand or buy interest to take in and fill all of the sell orders. Traders don't need to undercut each other, so the price stops going down.
As you can also see on the chart, there is support for Oracle around $191.
This isn't a coincidence. There is support at this level because it was a resistance level in January, and there can be support at prior resistance. This is a common dynamic in markets.
Some of the people who sold around $191 came to regret doing so when the resistance broke in June, and the price moved higher. Many decided that if they could eventually do so, they would buy their shares back at their selling price.
So when the shares fell back to around $191, these remorseful sellers placed buy orders. There were so many of these orders that it formed support.
Now traders are watching Oracle for a potential rally. Stocks can move higher off support when impatient buyers start to outbid each other. They don't want to miss the trade, so they become willing to pay higher prices.
This could force the stock into an uptrend, and it may be about to happen here.