Halliburton (HAL) at 5-Week High After Mixed Earnings

Oil services provider Halliburton Company (HAL) is trading at a five-week high in Monday's pre-market after beating second quarter 2020 profit estimates by a wide margin and coming up short on revenues. Earnings per share (EPS) of $0.05 defied expectations for a $0.12 loss, while revenues fell a stomach-churning 46.1% year over year to $3.2 billion, below estimates of $3.35 billion. The collapse in U.S. oil production underpinned the shortfall, generated by erratic second quarter reopening efforts.

Key Takeaways

  • Halliburton Company (HAL) topped second quarter earnings estimates, reporting a profit of $0.05 per share.
  • The stock was trending lower for nearly six years prior to the first quarter decline.
  • The positive post-news reaction raises the odds for a rally up to resistance near $16.
  • The oil services sector is benefiting from higher crude oil prices.

The oil services sector struggled for years before the pandemic, with high debt loads and poor management undermining profitability. This stock topped out more than six years ago and had already fallen more than 60% before world markets collapsed during the first quarter's pandemic shutdown. The subsequent downdraft dropped the former blue chip more than 80% off the January high before finding support at the lowest low since 1972.

Crude oil futures have posted impressive gains since April, lifting into resistance in the low $40s while underpinning recovery waves in all sorts of energy stocks. However, most are still trading below key levels broken this year, and Halliburton is no exception, stuck between support at the 50-day exponential moving average (EMA) and resistance at the 200-day EMA. It has also failed to remount the broken 2008 low in the teens, keeping bears in full control of the ticker tape.

An exponential moving average (EMA) is a type of moving average (MA) that places a greater weight and significance on the most recent data points. The exponential moving average is also referred to as the exponentially weighted moving average.

Halliburton Long-Term Chart (2006 – 2020)

Long-term chart showing the share price performance of Halliburton Company (HAL)

The stock broke out above the 2006 high at $41.99 in 2008 and topped out quickly in the mid-$50s. It sold off to a five-year low during the economic collapse and turned sharply higher at year end, completing a round trip into the prior high in 2011. The subsequent breakout failed, yielding a higher 2012 low, followed by a more successful effort in 2014, when a strong rally impulse posted an all-time high at $74.33.

A selloff into the mid-$20s in 2016 completed a trading range that broke to the downside in the second quarter of 2019. Price action held above the deep 2008 low into a February 2020 breakdown that found support just below the 2002 low in the deep single digits. The second quarter bounce barely registers in this long-term view, stalling 20 points below the 200-month EMA, which was broken on heavy volume in the fourth quarter of 2018.

Halliburton Short-Term Chart (2017 – 2020)

Short-term chart showing the share price performance of Halliburton Company (HAL)

The daily view highlights multiple resistance levels broken in recent years. The stock is currently trading right on top of the 2008 low, finishing up the second month of a testing process that should determine short-term price direction. A buying spike here will trigger a larger-scale buy signal if price can mount the 200-day EMA at $16, but reward potential will remain limited due to equally strong obstacles at $21 and $27. 

The on-balance volume (OBV) accumulation-distribution indicator offers hope to battered bulls, lifting back to mid-2019 levels in the second quarter. It has been pushing against that barrier for the past three and a half months, raising the odds for a breakout that predicts price will soon follow. The stock was trading in the mid-$20s when OBV topped out last year, so the uptick has the potential to reach the broken 2010 low just above $21.

On-balance volume (OBV) is a technical trading momentum indicator that uses volume flow to predict changes in stock price. Joseph Granville first developed the OBV metric in the 1963 book Granville's New Key to Stock Market Profits.

The Bottom Line

Halliburton stock is trading higher after a mixed second quarter earnings report and could now test moving average resistance near $16.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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