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Shares of Oracle (NASDAQ:ORCL) are pressuring the Software Sector (GSO.X) this morning, following the company's warning late last week.

Late last Friday, Oracle officials reported that year-over-year sales growth and operating income would be about the same in the prior quarter. The performance is expected to result in earnings per share of about 1 cent below previous estimates. Officals reported that sales in the U.S. and Europe had increased slightly over the pervious quarter, but that increase was not enough to offset weakness in the Asian markets.

Oracle's warning was surprising to most investors because the company had lowered expectations by a wide margin. The bar was set so low that Oracle could virtually trip over expectations to meet its estimates. But as the firm proved last week, the bar was not set low enough. Moreover, the company's warning revealed the difficulty that remains in those companies tied to capital expenditures.

Shares of Oracle had been trading well relative to the broader market and its sector prior to this morning's reaction to the warning. Its upside work, however, was taken out with today's 16 percent drop. The stock broke below multiple double-bottoms and a triple-bottom with the sell-off today. On the point and figure chart, there isn't any support until the September low at $10.50.

ORCL - P&F

The bar chart reveals more of a micro picture of Oracle's potential downside over the short-term, as well as logical support. The stock opened at its 61.8 percent retracement level this morning, from which it slid lower through the time of writing. The $12 level is the most likely short-term support level over the short-term. That level marks roughly 81 percent of the stock's rally from the September low through January.

ORCL - Daily

Through the time of writing, the Software Sector (GSO.X) was shrugging off the weakness in shares of Oracle. The ability of the sector to ignore Oracle's warning is certainly a positive and may stem from the overall bullish tone in stocks this morning.

Eric Utley
Option Investor

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