Oracle (ORCL) encountered a 3% decline in its shares on Tuesday following reports from The Information stating that negotiations with Elon Musk’s xAI regarding a potential $10 billion server deal had ceased. According to Musk, xAI has opted to develop its own system to enhance control over project completion speed.
Technical Analysis Highlights Potential Bearish Signals
Despite Oracle’s upward trajectory since the earnings-driven gap on June 12, recent developments suggest a test of bullish sentiment. A bearish engulfing pattern observed on Tuesday, featuring a smaller bullish candle followed by a larger bearish one, typically signifies weakening upward momentum and a potential reversal.
Additionally, a divergence has emerged between Oracle’s price, which reached a higher high last week, and its Relative Strength Index (RSI), which registered a shallower peak. This technical discrepancy often indicates a fatigue in the uptrend.
Key Retracement Levels to Monitor
In anticipation of potential retracement, investors are advised to monitor three critical support levels for Oracle’s stock:
$134 Level: Initial support where buying interest may emerge, corresponding to the earnings gap low.
$127.50 Level: A close below $134 could trigger a decline to this level, marked by a horizontal line connecting multiple swing highs over the past year. This area coincides closely with the rising 50-day moving average (MA), potentially transforming from resistance to support.
$117 Level: Further downside could lead to a retest of this level, where a trendline convergence supported by peaks, troughs, and the 200-day MA might attract buyers.
