Shares of energy company Halliburton Company (NYSE:HAL) rallied for a third day in a row on Wednesday, up 3.38% on the day. Despite my doubts around reflationary pressures in the market, the fact remains that price action is the ultimate arbiter and the charts of HAL stock display a bullish picture one must respect until proven wrong.
The energy sector of the S&P 500 as represented by the Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) had an ugly first eight months of 2017 until reflationary pressures in part thanks to a rising price of oil came about in the latter part of the summer. Energy stocks as a group have relatively lagged the bullish move in the price of oil but the XLE ETF now looks increasingly giddy to finally break up and out past the $70.50 area that had held as resistance since early November.
Of course the bullish-looking chart of the XLE ETF is simply a sum of its parts, i.e. reflects the bullish posturing of its constituent stocks such as Halliburton — which currently makes up 3.17% of the ETF.
HAL Stock Chart
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
A quick glance at the multiyear weekly chart of HAL stock shows one seriously choppy mess with tops very well defined by strong and bearish reversals. The bottoms have also come on strong bullish reversals.
Overall this is one messy chart, although it is noteworthy that thanks to the rally thus far this week, HAL stock is now attempting to break back above both its 50- and 200-week simple moving averages.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that the price action since June allowed HAL stock to form an inverse head and shoulders pattern of sorts with the head of the formation, or the point where sellers exhausted themselves having taken place in late August. The rally so far this week has now cleanly pushed the stock back above its red 200-day simple moving average as well as past horizontal resistance around the $46 mark.
From here if momentum can be sustained, HAL stock could begin moving toward a next upside target closer to $51. Any strong bearish reversal in the stock particularly if it coincides with an equally bearish move in the energy sector as a whole would be a stop loss signal for the trade.
Check out Anthony Mirhaydari’s Daily Market Outlook for Dec. 21.
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