Halliburton Beat Earnings Estimates and the Stock Is Higher - Where's the Further Upside?

Halliburton shares are higher thanks to the formation of a golden cross on the oil-services giant's daily chart last week. The upside is to this week's risky level at $26.33.
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Halliburton  (HAL) - Get Report on Tuesday reported top- and bottom-line results that beat analysts' estimates. The stock opened slightly lower but reversed course thanks to the formation of a golden cross on its daily chart. 

The weekly chart is also positive but overbought, which shows strong technical momentum. The positive reaction should extend to its risky level for this week at $26.33.

The Houston oil-services giant reported solid gains in international markets but a lag in the U.S. on a slowdown in fracking activities. Here’s the coverage as reported by TheStreet.com.

The stock is trading above $24 today and is down 0.3% so far in 2020. 

It's in bear-market territory 25% below its 52-week high of $32.71, set on Feb. 20, 2019. It’s also in bull-market territory 44% above its 52-week low of $16.97, set Aug. 26.

Fundamentally, Halliburton has a p/e multiple of 18 and offers a dividend yield of 3%, according to Macrotrends.

The daily chart for Halliburton

Daily Chart For Halliburton

Daily Chart For Halliburton

Courtesy of Refinitiv XENITH

Halliburton had been below a death cross for a long time -- until last week. On Jan. 16, the 50-day simple moving average rose above the 200-day simple moving average, which confirmed a golden cross. This is a buy signal, indicating that higher prices lie ahead.

The close of $24.47 on Dec. 31 was an important input to my proprietary analytics. The horizontal lines at the top of the chart are its first-half semiannual risky level at $40.24 and its annual risky level for 2020 at $40.44. 

The monthly value level for January is $14.76, with the first-quarter value level at $13.12. 

The near-term upside is to this week’s risky level at $26.33.

The weekly chart for Halliburton

Weekly Chart For Halliburton

Weekly Chart For Halliburton

Courtesy of Refinitiv XENITH

The weekly chart for Halliburton is positive but overbought, with the stock above its five-week modified moving average of $23.57. 

The stock is well below its 200-week simple moving average, or reversion to the mean, at $39.16. The stock has been below this moving average since the week of July 27, 2018, when it was $44.42. 

The 12x3x3 weekly slow stochastic reading is projected to end this week at 82.89, down from 84.42 on Jan. 17. 

Last June this reading was 8.89. This reading below the 10 threshold made the stock technically too cheap to ignore.

Trading Strategy: Buy weakness to its 200-day simple moving average at $22.52, which is the guideline to use following the formation of a golden cross. 

Short-term traders can book profits on strength to the weekly risky level at $26.33.

If fracking picks up, the upside is to its semiannual and annual risky levels at $40.24 and $40.44, respectively.

How to use my value levels and risky levels:

The closes on Dec. 31, 2019, were inputs to my proprietary analytics and resulted in new monthly, quarterly, semiannual and annual levels. Each uses the last nine closes in these time horizons.

New weekly levels are calculated after the end of each week. New monthly levels occur after the close of each month. New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

How to use 12x3x3 Weekly Slow Stochastic Readings:

My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the past 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold.

A reading above 90 is considered an inflating parabolic bubble formation, which is typically followed by a decline of 10% to 20% over the next three to five months.

A reading below 10 is considered too cheap to ignore, which typically is followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.