Who said Tech was dead? While concerns towards the Technology sector have increased following the late afternoon swoon in tech stocks two weeks ago, shares of Oracle surged over 8% on Thursday following a strong earnings report after the close on Wednesday. That rally in reaction to earnings was the stock’s best earnings reaction day since March 2009 and the fourth biggest one-day gain following earnings since the dot-com crash. With Thursday’s rally, shares of ORCL also traded to all-time highs well above the levels it reached during the 2000 bubble.
Just as impressive as ORCL’s performance yesterday, the stock also traded at the most extreme short-term overbought level it has traded in its history. ORCL closed 5.6 standard deviations above its 50-day moving average yesterday, which exceeded its previous most extreme levels by a mile. When looking at stocks relative to their 50-day moving averages, three standard deviations typically counts as pretty stretched. Occurrences where a stock trades four standard deviations above its 50-day don’t come by very often, but five is practically unheard of! Now, just because a stock reaches extreme overbought or oversold levels doesn’t mean it has to reverse course. Instead, it just serves as an indication of how far the stock’s current price has deviated from its typical range. In the case of ORCL, what also sticks out is the fact that less than a year ago, the stock traded at its most oversold level since just after its IPO in 1986.