EOG Resources Inc. (EOG) was reviewed in the middle of February, and I noted from the Point and Figure chart that, "we can see an important upside breakout at $110. Prices rally to $118 and plunge to $97. A downside price target of $75 is indicated but if EOG cannot rally past $110 again, the previous breakout level, I would get nervous."
EOG could not rally past $110 and declined again in March to a new low close, however, a bullish divergence with the momentum study developed changing the outlook. Let's drill down on the charts again.
In this updated daily bar chart of EOG, below, we can see that prices are below the declining 50-day moving average line but a rally above $106 could break the line. EOG is above the rising 200-day average line and we can see a successful test of that line in March.
The daily On-Balance-Volume (OBV) line shows improvement from a mid-March low. The key indicator change, in my opinion, is the higher low in the momentum study from February to March. This pattern compares to the lower lows made in the same time frame giving us a bullish divergence that suggests that there were scale down buyers in March slowing the rate of the decline.
In this weekly bar chart of EOG, below, we can see over the past two months the tests of the rising 40-week moving average line. The weekly OBV line has been neutral the past four months so I will be looking for a shift here.
The weekly Moving Average Convergence Divergence (MACD) oscillator is pointed down but the two moving averages of this indicator have begun to narrow and a future crossover would be bullish.
In this Point and Figure chart, below, we can see an upside price target of $126.03. A trade above $108.68 will open the way to further gains, in my opinion.
Bottom line: Aggressive traders could go long EOG on strength above $108 and add on gains above $110 risking below $100 for now. $125 is our price objective.
