Don't Count on a Reversal for Halliburton Yet

 | Aug 14, 2017 | 9:59 AM EDT
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Halliburton Co. (HAL) peaked in late January and has been in a decline since. There have been some bounces on the way to the downside, but they haven't traveled much more than $4 from trough to peak, and have not lasted more than a few weeks. That sounds bearish, and it is. But to get an edge in the markets, we need to be more forward looking and less reactionary.

There is always a risk of being early or being wrong, but let's take a look at the latest charts and indicators on HAL to see what signals could foreshadow an upside turnaround or recovery.

 

In this daily bar chart of HAL, above, we can see the six-plus-month decline in prices. HAL is below the declining 50-day moving average line. HAL is also well below the 200-day moving average line, which started to turn lower in July. The daily On-Balance-Volume (OBV) line turned lower in early March, signaling that sellers of HAL were more aggressive than buyers.

In the lower panel is the 12-day momentum indicator. The momentum indicator has made equal lows since late March, as prices have made lower lows. This difference between the price action and the indicator is called a bullish divergence -- prices doing one thing while the indicator does something else. A bullish divergence can, at times, foreshadow a reversal to the upside.

In this daily Japanese candlestick chart of HAL, above, we can see a possible inverted hammer pattern for this past Friday. This may not be the best-looking inverted candle pattern I have seen, as the upper shadow is about the same length as the real body.

When I was learning about candlestick patterns alongside my long-time friend Steve Nison, we learned to look for upper shadows that were two- to three-times the length of the real body. The real body is the distance between the open and the close. We learned about the "rules", but also about the essence of the charting technique and that sometimes you can have a reversal under less than perfect conditions.

The other thing to point out on this chart is that volume dried up into Friday. Notice the other points on the chart where volume was very light?

 

In this weekly bar chart of HAL, above, we can see that prices are testing the lows of September 2016. Prices are below the declining 40-week moving average line. The weekly OBV line has been pointed down from January but the weekly Moving Average Convergence Divergence (MACD) oscillator has crossed for a cover shorts buy signal.

Bottom line: HAL does not present the strongest technical case for a reversal, but sometimes the market surprises us. That what keeps us on our toes and makes life interesting. Exercising a little caution, I would wait for two closes above $42 before trying the long side, risking a close below $39.

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