Baker Hughes Incorporated (NYSE:BHI) shares are taking it on the chin today in what could be the long-awaited resolution of a multimonth triangle pattern. With the broader market soaring to new heights as I type, the weakness in BHI stock sticks out like a unicorn on an oil rig.
And speaking of oil, crude prices certainly aren’t helping things today either. Crude futures are down 3%, dragging energy stocks along with them. Oil services like Baker Hughes Incorporated are suffering the worst.
With today’s slip, BHI stock now rests below all major moving averages. For you rookie chartists, that means it’s in a downtrend on virtually every time frame. In such an environment, the path of least resistance is lower, and you should view any and all rallies with skepticism.
The chart pattern that has defined Baker Hughes Incorporated’s behavior since March is a symmetrical triangle. A series of lower pivot highs and higher pivot lows creates this pausing pattern.
It reflects a stalemate of sorts between bulls and bears in BHI stock where neither can gain the upper hand for a spell.
Completion of the pattern arrives in the form of a breakout of either trendline. If today’s drop remains true, it appears we have downside resolution. Sellers have finally won the tug-of-war, in other words.
BHI Put Options
On the implied volatility front, readings remain subdued for BHI stock options. And that means we can purchase them on the cheap. If you’re willing to wager the stock continues plumbing the depths, buy the July $57.50 put option for around $2.65.
The max loss is limited to the $2.65 paid at trade entry. To minimize the damage if BHI decides to get frisky, I suggest exiting if the stock jumps above its 50-day moving average near $59.
The max gain is limited only by the stock falling to zero, so pull out the pom-poms and root for a massive plunge in the days ahead.
Unfortunately, BHI options are slightly illiquid, so be sure to use limit orders when buying the put.
At the time of this writing, Tyler Craig held no positions in any of the aforementioned securities.
