The rally caught some investors off guard, given that Halliburton reported in-line earnings results and a revenue miss. But surprisingly enough, a rally on negative news can be a bullish reaction.
It's a sign that Wall Street has become so negative on a stock that even disappointing results such as these weren't as bad as investors and analysts were expecting.
Monday's action now has us wondering whether Halliburton, like Schlumberger, may have finally hit rock bottom as well. It makes Halliburton a perfect candidate for Real Money'sStock of the Day.
Let's look at the chart.
Trading Halliburton Stock
Earnings of 34 cents a share were in line with estimates, while sales of $5.55 billion decreased 10% year over year and missed expectations by $270 million. Still, investors on Monday are finding reasons to buy the stock.
If Halliburton stock can maintain its gains, it may well solidify a bottom. That said, it's got its work cut out for it, at least from a technical perspective.
With Monday's early rally, shares are reclaiming the 50-day moving average after successfully holding the $18 level as support. From here, the $20.50 to $21 area will be very key.
There HAL stock will find downtrend resistance (blue line), the declining 100-day moving average and the 78.6% retracement. If this area acts as resistance, it will be important to see that Halliburton stock can find support and avoid retesting the $18 area. For instance, it wouldn't be bearish for shares to get rejected from the $20.50 to $21 area if it found support from the 50-day moving average.
Over $21 and there could be some room to run. $24 was a notable level of resistance in the summer, while the 61.8% retracement is up at $24.30. The declining 200-day moving average is currently at $24.68, although it very well could be below $24 by the time HAL stock tests it.
On the flip side, a move below $18 would be a very negative development for Halliburton stock. It would put the shares below the pre-earnings lows and put the August low of $16.81 on the table.
The bottom line: Above $21 is bullish, above the 50-day moving average is constructive and below $18 is bearish.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.