Hess Corp. (HES) looks like it has been basing since June, but I would be patient and wait for an upside breakout before entering from the long side. Let's review the charts and indicators to see what sort of potential and risks may lie ahead.
In this daily bar chart of HES, below, we can see what some observers might call a head-and-shoulders bottom formation. A left shoulder is made in June, followed by a head at the August low. The right shoulder could be "complex" with at least two dips -- one in October and perhaps another one last month or this month. Typically, volume builds as a bottom develops, and this can be seen especially since October. The slope of the 50-day moving average line turned positive in late September but prices are below that line. The slower-to-react 200-day moving average line is still declining.
The On-Balance-Volume (OBV) line shows a strong turnaround from August and the strength in the OBV line tells us that buyers of HES have been more aggressive in recent months. The trend-following Moving Average Convergence Divergence (MACD) oscillator looks like it can turn up above the zero line for an outright go-long signal in the weeks ahead.
In this weekly bar chart of HES, below, going back three years we can see that prices have been trading around the still-declining 40-week moving average line. The weekly OBV line shows improvement since the middle of August and the weekly MACD oscillator generated a cover-shorts buy signal in September and could soon cross above the zero line for an outright go-long signal.
In this Point and Figure chart of HES, below, we can see the base pattern in a different way. A trade up to $49.03 on this chart would be a breakout and give us a $56.03 price target.
Bottom line: The price action of HES is more encouraging than a number of other energy names we have seen in recent weeks. Investors and traders should be patient and wait for a strong close above $49 before buying. After going long a stop below $43 could be used with a $56 price target.
