Halliburton Company (HAL) is up more than 2% in premarket trade on Tuesday after exceeding fourth-quarter 2020 profit projections and reaching moderate sales guidance. The oil equipment company earned $0.18 per share, $0.04 more than expected, as sales plummeted 37.6% year over year to $3.24 billion. Earnings per share (EPS) decreased by 44% compared to the same period in 2019.
- Despite a 37.6% sales reduction, Halliburton is trading higher after surpassing quarterly expectations.
- For more than six years, the stock has been in a significant downturn.
- The rally that began in March 2020 is reaching a stumbling block in the mid-$20s.
To cope with a long-term industrial recession, the corporation has cut expenses, reduced its dividend, and laid off staff. Demand is now resuming in lockstep with higher crude oil prices, supporting the stock’s strong rise into January. Nonetheless, oil service firms have been compelled to provide severe discounts in order to keep business, cutting revenue and resulting in Halliburton’s fourth consecutive year of negative returns.
Furthermore, the powerful rebound wave that began in March 2020 at a multi-decade low is soon reaching resistance in the mid-$20s. The crude oil contract is also reaching a big technical barrier, indicating that the fossil fuel rally will stall, giving way to range-bound activity that might last months or years. As a consequence, sector investors may want to tighten stops and take partial gains in order to lock in some of the large rally.
Wall Street is adopting a “wait and see” attitude, with Halliburton shares receiving a consensus “Hold” rating based on five “Buy” and six “Hold” recommendations. Two experts continue to advise owners to liquidate holdings and exit the market. Price projections presently vary from $12 to a Street high of $25, with the stock likely to start only $4 below the high objective on Tuesday. Without enhancements and greater objectives, further gains will be tough to attain.
Cost-cutting initiatives are actions taken by a firm to minimize expenditures and increase profitability. Cost-cutting strategies are generally undertaken when a firm is in financial difficulties or during economic downturns. They may also be used if a company’s management anticipates future profitability concerns, in which case cost-cutting might become part of the corporate plan.
Halliburton Weekly Chart (2014 – 2021)
In February 2014, the stock broke out over six-year resistance in the mid-$50s and reached an all-time high of $74.33 in July. The following decline missed the breakout in October, signifying the start of a slump that has since lasted more than six years. In 2016, the drop found support in the mid $20s, forming a trading floor ahead of lower highs in 2017 and 2018. It breached range support towards the close of 2018, resulting in sharp losses to the 46-year bottom in March 2020.
A rebound wave halted in August near 50-week EMA resistance, resulting in a higher September low ahead of a November breakout that established an 11-month high ahead of this morning’s report. Price is now targeting resistance at the.786 Fibonacci sell-off retracement at $21, with a breakthrough supporting a quick rally towards the January 2020 top at $25.47. That level indicates resistance that may take weeks or months to overcome.
The stock has entered a weekly stochastic sell cycle, favoring lower prices until February. The monthly indication, on the other hand, is grinding through a purchase cycle that has gained momentum in recent weeks, with the time frame conflict suggesting two-sided price action favoring bulls over bears. Even so, given the few areas of resistance and Wall Street’s most bullish objectives, long-side exposure here may not be worth the hassle.
Fibonacci retracement levels are horizontal lines that show areas of support and resistance. They’re based on Fibonacci sequences. Each level is assigned a percentage. The percentage represents the amount of a previous move that the price has retraced. The Fibonacci levels of retracement are 23.6%, 38.2%, 61.8%, and 78.6%. 50% is also used, albeit it is not formally a Fibonacci ratio.
The Bottom Line
Despite announcing a 37.6% drop in quarterly sales, Halliburton is trading higher on Tuesday.
Disclosure: At the time of publishing, the author had no investments in the aforementioned securities.
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