Halliburton Company (HAL) is trading up more than 2% in Tuesday’s premarket after beating Q4 2020 earnings estimates and hitting modest revenue tips. The oilfield equipment supplier posted earnings of $0.18 per share, $0.04 better than expectations, while revenue fell 37.6% year-over-year to hit $3.24 billion. Earnings per share (EPS) recorded a 44% drop in profit compared to the same quarter in 2019.
Kay take away
- Halliburton is trading higher after hitting quarterly estimates, despite a 37.6% decline in revenue.
- The stock has been in a major downtrend for over six years.
- The rally that started in March 2020 is fast approaching resistance in the middle of $20.
The company cut costs, slashed dividend, and laid off workers to deal with a long-term collapse of the industry. Demand is now picking up alongside rising crude oil prices, supporting the stock’s impressive performance in January. Despite this, oil service companies have been forced to offer steep discounts to maintain operations, reducing revenue while generating the fourth consecutive year of negative returns for Halliburton.
Additionally, the strong wave of recovery that began at a multi-decade low in March 2020 is rapidly approaching resistance in the mid-$20s. The Crude Oil contract is also approaching a major technical hurdle, suggesting that the Fossil Fuels rally will falter, giving way to range-bound action that could last for months or years. As a result, investors in the sector may wish to tighten stop and take partial profits to lock in some of the big bounce.
Wall Street is taking a “wait and see” approach, posting a consensus “Hold” rating on Halliburton stock based on five “Buy” and six “Hold” recommendations. Two analysts are still advising shareholders to close their positions and move to the sidelines. Price targets currently range from a low of $12 to a high of $25, while the stock is expected to open Tuesday’s session just $4 below the target high. It will be difficult to continue the rise without upgrades and higher goals.
Cost reduction refers to the measures put in place by a company to reduce its expenses and improve its profitability. Cost reduction measures are typically implemented during times of financial hardship for a business or during economic downturns. They can also be adopted if the management of a company expects profitability problems in the future, in which case cost reduction may be part of the business strategy.
Halliburton Weekly Chart (2014 – 2021)
The stock broke through the six-year resistance in the middle of $50 in February 2014 and hit an all-time high of $74.33 in July. The subsequent pullback failed October’s breakout, signaling a downtrend that has now been in effect for over six years. The decrease observed initially Support in the upper $20s in 2016, setting a floor, ahead of the lower highs of 2017 and 2018. It broke range support in late 2018, posting heavy losses until the 46-year low of March 2020.
A wave of recovery stalled at 50 weeks exponential moving average (EMA) in August, producing a higher September low, before a November breakout that posted an 11-month high ahead of this morning’s report. Price action is now testing resistance at .786 Fibonacci sell retracement near $21, with a breakout favoring a quick advance towards the January 2020 high at $25.47. This level marks a resistance that could take weeks or more to overcome.
The stock entered in a week stochastic sales cycle that favors lower prices until February. However, the monthly indicator is going through a buying cycle that has strengthened in recent weeks, with the conflict between timeframes predicting bilateral price action favoring bulls over bears. Even so, a long exposure here might not be worth it, given the few resistance points and more optimistic targets on Wall Street.
Fibonacci retracement levels are horizontal lines that indicate where support and resistance are likely to occur. They are based on Fibonacci numbers. Each level is associated with a percentage. The percentage is the amount of a previous move that the price has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8% and 78.6%. Although not officially a Fibonacci ratio, 50% is also used.
Halliburton is trading higher on Tuesday despite a 37.6% decline in quarterly revenue.
Disclosure: The author held no position in the aforementioned titles at the time of publication.