EOG Resources (EOG) has rallied back to the underside of the rising 200-day moving average line and the underside of the declining 50-day moving average line. With crude oil futures recently strong it will be interesting to see how EOG can respond as it sits at a key technical juncture.
Prices have been trending lower since early December in a downward sloping channel. EOG has traded up to the downtrend line as well as the key moving averages. We could call this a confluence of technical indicators but let's just see what these derivatives tell us and how we should be positioned.
In this daily bar chart of EOG, above, we can see how prices in the past month have held around the lows of August through November in the $90 to $87 area. Prices rallied in the past month to the underside of the 50-day and 200-day moving averages. EOG is likely to close above the 50-day moving average today and could also close above the 200-day. A rally now would tend to make the decline below $93 look like a bear trap of sorts.
The movement of the On-Balance-Volume (OBV) line is very interesting in that the line rose from November and kept rising till early April. This rising OBV line suggests that buyers were more aggressive even as prices declined from December. I would not consider this typical or normal action from this kind of indicator.
In the lower panel is the 12-day momentum study, which shows a bullish divergence from February to May with higher momentum readings despite prices making lower lows in the same timeframe. This bullish divergence for four months could be enough to propel EOG above the downtrend line.
In this weekly chart of EOG, above, we can see that prices have only been below the rising 40-week moving average line for four weeks and it will not take much of a rally to put EOG back above this indicator. The weekly OBV line shows a much different pattern than the daily chart. Here the OBV line rises from January to December and then turns neutral.
The trend-following Moving Average Convergence Divergence (MACD) oscillator is in a bearish mode as it looks like it will move below the zero line.
In this Point and Figure chart of EOG, above, we can see that $89.07 is the bottom end of a support area. A rally to $97.41 will be a breakout and should precipitate further gains.
Bottom line: After a five- to six-month correction, EOG looks poised to break its downtrend and start a new move to the upside. Traders could probe the long side of EOG at current levels risking a close below $90.