Image Source: Pixabay

It wasn’t that long ago that Oracle (ORCL) saw its market value skyrocket thanks to its implications for artificial intelligence. In September, management announced that it had a backlog of contracted work that had more than tripled to $455 billion. Essentially, the tally represented intense demand for renting AI servers in the cloud. Unfortunately for stakeholders of ORCL stock, that honeymoon appears to have faded.

In the trailing one-month period, the tech giant suffered a loss of more than 27%. Circumstances have not improved in recent sessions, with the past five sessions incurring red ink to the tune of over 8%. On Thursday, ORCL stock suffered a sizable drop exceeding 4%.

Adding to the tragedy was that, prior to the meltdown, ORCL had easily outpaced its peers, including Amazon (AMZN), Microsoft (MSFT) and Salesforce (CRM). To be sure, the collective performance of these three enterprises have been uneven. Still, none of them have witnessed anything close to the implosion of ORCL stock.

According to The Economic Times, reports have emerged that Oracle’s cloud business — which represents the company’s main growth engine — runs on razor-thin margins. Internal data leaked in October shows that the cloud infrastructure unit is only making around 14% gross margin, well below levels generated by rivals Amazon and Microsoft.

Using a Kolmogorov-Markov framework layered with kernel density estimation, the forward 10-week median returns of ORCL stock can be arranged as a distributional curve, with outcomes ranging between $212 and $234 (assuming an anchor price of $217.57). Further, price clustering would likely occur at $227.

(Click on image to enlarge)

The above assessment aggregates all sequences since January 2019. However, the current quantitative profile is distributive, with ORCL stock arranged in a 4-6-D formation; that is, in the trailing 10 weeks, the security has printed four up weeks, six down weeks, with an overall downward slope.

Under this specific condition, the expected range of outcomes surprisingly narrows between $214 and $229. Most significantly, price clustering would likely occur at $220. That’s not necessarily advantageous for the bulls per se. However, the magnitude of density difference comes out to about 95.12%.

Stated differently, while ORCL stock should have a high exceedance ratio relative to the anchor, most outcomes associated with the 4-6-D sequence will likely see groupings around $220 over the next 10 weeks.

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