Here's Why You Should Stick With Halliburton

You made money with the oil-field service company before and you'll continue to make money with it now.
By Richard Saintvilus ,

Oil prices are at decade lows but have still risen about 45% since bottoming out in January. This has helped oil companies of all types, including oilfield services company Halliburton (HAL) - Get Report .

Since January shares of Halliburton, currently around $45.60, have skyrocketed more than 60%.

We recommended the stock at around $28 per share. The bet has paid off handsomely. If you bought then it would be a mistake to part with this winner now, especially ahead of the Houston company's second-quarter earnings results before the opening bell Wednesday.

At the time, betting on Halliburton, or any other oil company, seemed foolish. But the company's underlying value was too appealing to pass up. What I said back in January still holds true today -- perhaps even more so, given that uncertainty surrounding its pending merger with Baker Hughes (BHI) is now out of the way. As it stands, HAL has a much clearer pathway towards gains, as seen in this chart from TradingView.

The stock has soared almost 34% year to date, besting not only the 6% rise in the S&P 500 (SPX)   but also the Energy Select Sector SPDR (ETF) (XLE) - Get Report , which has risen 15%.

You can see from the chart that the stock, which last week reached a 52-week high of $46.69, has been on a strong run the past six months. In the past month and a half, however, HAL has been in consolidation mode, moving between $46 and $43 per share, including a post-Brexit dip to around $42 on June 27. Following that dip, which sent the stock below its 20-day ($44.58 -- blue line) and 50-day ($43.13 -- pink line), the stock quickly recovered in bullish manner.

Fundamentally, despite the stock's strong run towards its 52-week high, shares are not "overheated." The stock is still down about 36% over the past two years, below its all-time high of $71.01 reached on June 1, 2014.

Can the stock reclaim that level? Not immediately. But the charts suggests that a rise towards $55 per share, or 20% higher, is possible in the next 12 to 18 months. So in the near term, stick with Halliburton and place your bets that the stock will break resistance at $46 and reach $50 by year's end, delivering gains of 10%.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in stocks mentioned.

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