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Software sinks to new lows on Oracle concerns

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Shares of software giant Oracle Corporation (NASDAQ:ORCL) $9.12 -9% are seeing selling after Lehman Brothers cut estimates saying it believes there a chance that ORCL may miss consensus estimates for its May quarter due to the tough microenvironment, price pressures inflicted by purchasing managers, the challenge of Oracle 11i, and continued employee departures. Lehman cuts Q4 2002 estimates to $0.11 from $0.13 and 2003 to $0.41 from $0.46, both below consensus. Oracle is scheduled to report Q4 earnings on/near June 17th. Consensus estimates compiled by Multex is currently $0.13 a share.

Oracle Chart - $1 box

I think bears should be using today's "bad news" and Lehman's trimming estimates as an opportunity to lock in gains and cover positions. Make note of Lehman's comments and look for any type of short-covering rally back near $12 as another short/put opportunity.

Weaker than expected economic data

This morning's released economic data has stocks under pressure today as the Dow Industrials (INDU) give back 76 points (-0.78%) and slip back below its 200-day moving average. The tech-heavy NASDAQ Composite (COMPX) trades down a stellar 36 points at 1,652 (-2.12%) and the larger cap tech's depicted by the NASDAQ-100 (NDX) trades down 2.6% at 1,243. The widely quoted and followed S&P 500 Index (SPX.X) is down 7.6 points (-0.7%) at 1,069,30.

The April ISM Index fell to 53.9% from 55.6% in March, which was below the 55.0% consensus. Construction Spending fell 0.9% in March, much weaker than the 0.1% consensus.

Today's reaction looks to have had some market participants hopeful that yesterday's slightly bullish Consumer Confidence data would be followed by another positive economic report. However, it looks as if our analysis that the gains found were most likely due to short-covering were accurate.

Jeff Bailey
Senior Market Technician
Option Investor

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