Baker Hughes ( BHI) is on the verge of an upside breakout. The stock is up just under 1.5% today and is bumping up against its August peak. A clear takeout of the $48.50 level would violate a key overhead trend line that links the May, June and August highs. Once clear, Baker Hughes could begin a powerful rally phase.
Until BHI's second-quarter earnings report the stock continued its seven-week struggle with a declining 200-day moving average. With the help of two straight days of aggressive buying on July 28 and July 29, Baker Hughes was able to power past this key level. Since the start of August, the stock has been building a solid base above this area.
As this week comes to a close, Baker Hughes has spent over two weeks above the 200-day, the longest such streak since June of last year. With this solid footing underneath, the stock is a fairly low-risk long near current levels.
In the near term, Baker Hughes should be considered a low-risk buy between $48 and $47. This key zone includes the July high as well as this week's low. A close back below $46 would indicate that more basing is ahead before a fresh rally can take hold. On the upside, a close above $49 would be a key hurdle. A powerful breakout move could quickly follow.