This article originally appeared on RealMoney.com on Sept. 3, 2014 at 8:50 a.m. To read more content like this AND see inside Jim Cramer's multi-million dollar portfolio for FREE... Click Here NOW.
I want to stalk Halliburton (HAL) on the buy side -- and here is my case in favor of the stock, starting with the weekly chart.
This chart shows a bullish pattern of higher highs and higher lows. The most recent decline within the larger uptrend -- which has brought the stock down by $8.10 so far -- is now only similar to some of Halliburton's prior declines since around April 2012. Those prior slides had amounted to $9.04, $8.17, $7.19 and $8.92. Nice, healthy rallies started after all of those prior declines -- which is why I'm watching the stock for a similar move now, against price support at the $65.29-to-$66.16 area.
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On the daily chart, meanwhile, you can see the same symmetry projections -- but these also overlap other key Fibonacci price relationships, such as a 0.618 retracement of a prior major swing and some price extensions of other moves. These additional price relationships strengthens the trade setup.
The key price zone on the daily chart, which includes these other price relationships, comes in between $65.16 and $66.22. I can count at least eight price relationships within that area! Now, the fact that we're looking a big price cluster does not mean this level will definitely hold up as support, but it does mean that this area constitutes a rather important decision.
Typically I suggest that traders wait for a buy trigger before they buy, as this indicates that it is worth placing a bet on the stock.
So far, as of Tuesday evening, we have only seen the aggressive buy signal -- that is, a trigger on a 15-minute chart. So, if you're aggressive on Halliburton, you could act on this, placing your risk either below the key price-support zone or under the low made prior to the buy trigger.
If you want to wait for a safer, higher-probability bet, however, you might want to wait for the 78-minute chart pattern to fit in with this bullish analysis.
As you can see, there is quite a bit of resistance on this time frame -- between $68.52 and $69.58 -- and it could put the kibosh on the buy setup! Even though Halliburton has support on the daily and weekly chart, where we can define our risk, in order for Halliburton to look good on this time frame it needs to clear this resistance and the prior swing high at $70.50. If this occurs, I'll look at the next pullback for a higher-probability trade entry.
No matter how you may enter the trade, if the setup starts to play out, the initial upside target comes in at the $76.50 area. If, instead, the key support is taken out, I will consider myself wrong on the trade and exit any long positions.
Please refer here for more information on trade triggers.
See here for general guidance on Fibonacci trade setups.
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