Crude Oil Futures Lead Upside For Halliburton, Schlumberger And Weatherford

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Includes: HAL, SLB, WFT
by: Richard Suttmeier
Summary

Nymex crude oil futures suffered two popping bubbles over the last ten years in 2008 and in 2014 into 2016. It’s in bull market territory so far this year.

Halliburton and Schlumberger fully recovered from their 2008 popped bubbles setting their all-time intraday highs in July 2014. These are in bear market territory year-to-date.

Weatherford set its all-time high with oil in July 2008, recovered into July 2014 and is in bear market territory in 2018 is now an “option on survival”.

Today I focus on Nymex Crude Oil (CLv1) going back to its 2008 bubble and compare the volatility since then to the volatility for three oil & gas equipment & services companies.

Here’s A Scorecard For Crude Oil And The Three Stocks

Scorecard For Oil And Oil Stocks The Weekly Chart For Nymex Crude Oil Futures

Weekly Chart For Crude Oil Courtesy of MetaStock Xenith

From left to right crude oil set its “inflating parabolic bubble” all-time high of $147.24 per barrel in July 2008. The decline to its January 2009 low of $33.20 was a crash of 77%. Oil returned to its “reversion to the mean” (200-week simple moving average in green) during the week of Oct. 23, 2009 at $75.32. There were numerous buying opportunities as oil tracked it’s “reversion to the mean” into mid-2014. Oil breaking below its 200-week SMA during the week of Aug. 22, 2014 when it was $96.17, prompted a bear market decline of 73% until setting its multiyear low of $26.05 during the week of Feb. 12, 2016.

The horizontal lines from the 2008 high to this 2016 low are the Fibonacci Retracement levels of the overall decline. The rebound first stalled at its 23.6% retracement of $54.64 during the week of Dec. 12, 2016. This level became a chart support during the week of Dec. 1, 2017 setting the stage for the 2018 bull market. Oil began 2018 above its 200-week SMA then at $56.83. The rally has oil above its 38.2% retracement at $72.35.

My trading strategy is to be long oil as long as weekly closes are above my quarterly pivot at $73.87 and the $72.35 retracement level as the upside is to the 50% retracement of $86.66. This scenario is the Wall Street consensus and it will pull the oil stocks higher. If there is a chart failure, the risk is to my annual value level of $63.81 last tested on June 18 as a buying opportunity.

The Weekly Chart For Halliburton Co (NYSE:HAL)

Weekly Chart For Halliburton Courtesy of MetaStock Xenith

Halliburton traded as high as $55.38 in July 2008 then slumped by 77% to a low of $12.80 in December 2008 in sync with crude oil. Between this low and the all-time high $74.33 set in July 2014, Haliburton thus outperformed oil from the 2008 popped bubble to their 2014 high. Since July 2014 the stock lagged with a bear market decline of 62.8% to its low of $27.64 set during the week of Jan. 22, 2016. Note how the 200-week simple moving average or “reversion to the mean” was a magnet between the week of June 10, 2016 and the week of July 20 when the stock gapped lower. This gap was caused by missed earnings reported on July 23. The 2018 low of $35.75 was set on Sept. 7. The stock is up 16.7% since then.

My trading strategy is to buy weakness to my value level for October at $36.19 and reduce holdings on strength to my quarterly risky level at $47.11. My annual risky level is $55.68.

The Weekly Chart For Schlumberger NV (NYSE:SLB)

Weekly Chart For Schlumberger Courtesy of MetaStock Xenith

Schlumberger traded as high as $111.95 in July 2008 then was crushed by 69% to a low of $35.05 set in February 2009 in sync with crude oil. Between this low and the all-time high $118.76 set in July 2014, Schlumberger thus outperformed oil from the 2008 popped bubble to their 2014 high. Since July 2014 the stock lagged with a bear market decline of 49.8% to its low of $59.60 set during the week of Jan. 22, 2016. Note how the 200-week simple moving average or “reversion to the mean” proved a selling opportunity when tested on strength to $84.86 between the weeks of Dec. 2, 2016 and Jan. 27, 2017. The stock set its 2018 low of $59.25 on Sept. 7 and is up just 4.5% since then.

My trading strategy is to buy weakness to my quarterly and monthly value levels of $58.85 and $56.91, respectively, and reduce holdings on strength to my annual risky level is $87.18.

The Weekly Chart For Weatherford International PLC (NYSE:WFT)

Weekly Chart For Weatherford Courtesy of MetaStock Xenith

Weatherford traded as high as $49.98 in July 2008, then plunged by 84% to a low of $7.75 in December 2008 in sync with crude oil. The stock rebounded to $24.88 in July 2014. The stock fell below its 200-week simple moving average or it’s “reversion to the mean” during the week of Nov. 28, 2014 and has been below it since then when the average was $16.03. Weatherford has reported earnings losses since the week of July 22, 2016. The stock set its 2018 low of $2.07 on April 4 and re-tested this level with a low of $2.09 on Sept. 7. The stock is thus an “option on survival” trading between $1 and $3 a share. Investors taking risk on this type of stock should be prepared to lose the total investment dollars.

My trading strategy is to buy weakness to my quarterly and monthly value levels of $2.22 and $1.79, respectively, and reduce holdings on strength to my annual risky level is $3.71.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.