Investors witnessed a broad-based rally on Wednesday following the Federal Reserve’s decision to hike interest rates and signaling further hikes to come later this year. However, the rally wasn’t just confined to regular ol’ U.S. blue chips — it also spilled over into bonds, commodities, high yield and emerging markets. What particularly caught my attention was the rally in crude oil, which resulted in oil-related stocks such as Halliburton Company (NYSE:HAL) bouncing meaningfully off of critical technical support.
Traders and investors now have very well-defined risk to play HAL stock to the upside.
Before digging into the charts of Halliburton shares, allow me to remind you that a plethora of arguments can be made about the validity and sustainability of any stock market rally. However, as active investors we must primarily be realists in the sense that until a trend changes or at least gives off strong signals that it may soon do so, it is by definition to early to start leaning the other way in any meaningful way.
Wednesday’s broad market rally was just another reminder of this. Stocks — which some bears have been calling “overvalued” for weeks and months — simply continued to rip higher. It is neither our job to fight market trends nor to prove that we are smarter than the average investor.
Our only task as market participants is to make money. Period.
Wednesday’s rally in the price of oil, which bounced off its 200-day simple moving average, lifted the entire oil services industry stocks, as represented by The Market Vectors Oil Services ETF (NYSEARCA:OIH). As a result, many of the charts in the space — including HAL stock — look very similar in their bullish trading setups.
HAL Stock Charts
Starting off with the multiyear weekly chart, we see that after breaking past the black horizontal line last November, Halliburton stock continued to rally right to the upper end of the up-trending channel.
The retracement since those January 2017 highs pulled the stock back to a key technical confluence zone made up of the following:
- The black horizontal line (former resistance, now support?)
- The lower end of the up-trending channel (purple-dotted parallel lines)
- The 50- and 200-week simple moving averages (yellow and red lines, respectively).
This is one serious area of confluence support around the $47.50 – $48.50 area.
A bounce from here if not an outright new leg higher stands a good chance. More importantly so, this support area will act as a last resort stop-loss area for long side positions being initiated here.
On the daily chart, we see that on Tuesday, March 14, HAL stock bounced off its 200-day moving average (red) as downside momentum — as represented by the MACD oscillator — reached oversold extremes.
Wednesday’s post-Fed rally served as what I refer to as “follow-through buying.” and thus it was no great surprise that my proprietary B2 Reversal Indicator flashed a clear buy signal.
Barring any nasty bearish reversals in coming days, HAL stock now looks poised to rally into the mid-$50s as a next upside target.
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