Oracle Shares Shed 3% on Tuesday

Source: TradingView.com

Source: TradingView.com

Key Takeaways

  • Oracle shares shed 3% on Tuesday after a report from The Information said that talks between the computing giant and Elon Musk’s xAI over a potential $10 billion server deal had ended.

  • A bearish engulfing pattern has appeared on the Oracle the chart, a two bar price formation which indicates slowing upward momentum and a potential reversal.

  • Oracle shares may encounter support at key levels including $134, $127.50, and $117.

Oracle (ORCL) shares shed 3% on Tuesday after a report from The Information said talks between the computing giant and Elon Musk’s xAI over a potential $10 billion server deal had ended. Musk later posted on X that the xAI has opted to build its own system for greater control over the speed of its completion.

Below, we use technical analysis to locate key areas on Oracle’s chart to watch out for during a potential retracement.

Bearish Engulfing Pattern Emerges

Oracle shares have continued to edge higher following the stock’s June 12 earnings-driven gap. However, bullish sentiment surrounding the stock looks to be tested after a bearish engulfing pattern appeared on the chart Tuesday. Typically, this two bar price formation, which features a smaller bullish candle followed by a larger bearish candle that engulfs the first, indicates slowing upward momentum and a potential reversal.

Moreover, as the stock’s price made a higher high last week, the relative strength index (RSI) made a shallower high to create a technical divergence, also pointing towards a tiring uptrend.

Interestingly, taking a bars pattern from the December 2023 low to the March high and overlaying it from the April swing low projects a price target of around $150, just 2.9% above the stock’s all-time high (ATH) set on July 5 at $145.79.

Monitor These Key Retracement Levels

If the stock continues to retrace in upcoming trading sessions, there are three key areas to watch where the it may encounter support.

An initial level to keep an eye on sits at $134, where the shares could see buying interest around the earnings gap low.

A close below this level may trigger a decline to around $127.50, a location on the chart that would likely attract buyers near a horizontal line that links several swing highs over the past 13 months. This area also roughly aligns with the rising 50-day moving average (MA) and could potentially flip from an area of prior resistance into future support.

Further downside could see a retest of the $117 level, where buyers may defend a trendline that finds a confluence of support from a number of peaks and troughs and the 200-day MA.

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As of the date this article was written, the author does not own any of the above securities.

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