Teva Pharmaceutical Industries Limited (TEVA) shares fell more than 7% during Wednesday's session after an Oklahoma judge declined to approve a proposed $85 million settlement with the state unless he's assured that it complies with a new law targeting these kinds of deals. The move casts more uncertainty into an already perilous situation for drugmakers involved with the production and sale of opioids.

Oklahoma's larger lawsuit against Johnson & Johnson (JNJ), where the state is seeking $13 billion in damages, could provide a preview of how similar claims may play out in October when opioid drugmakers go on trial in Cleveland. Nearly 2,000 municipal and state governments have sued the same drugmakers in Ohio's federal court, and the decisions made in Oklahoma could have implications in Ohio's nationwide settlement.

Analysts have remained mixed on Teva Pharmaceutical stock. Earlier this month, Oppenheimer upgraded the stock to Outperform but lowered its price target to $12.00 per share due to the legal uncertainty. Analyst Esther Rajavelu believes that the stock could be a buying opportunity with shares trading at a 19-year low, but she is also cautious given Teva's opioid and price-fixing exposure. The good news is that the company's balance sheet could support $400 million in average annual penalties with refinancing of some debt tranches.

Chart showing the share price performance of Teva Pharmaceutical Industries Limited (TEVA)

From a technical standpoint, the stock moved sharply lower on Wednesday to retest its lows made in late May and early June. While it briefly broke down earlier in the session, the stock rebounded back into its price channel and recouped some of its losses. The relative strength index (RSI) remains oversold with a reading of 23.78, while the moving average convergence divergence (MACD) has stabilized after a bearish downswing.

Traders should watch for some consolidation near the lows of around $8.50 over the coming sessions. If the stock breaks down from these levels, it could reach fresh lows with support around $8.00. If the stock rebounds from these levels, traders could see a move toward upper trendline resistance at around $9.70. Price action will primarily be driven by the legal decisions coming out of the Oklahoma case.

The author holds no position in the stock(s) mentioned except through passively managed index funds.