Halliburton's Bullish Consolidation Pattern

05/13/04 09:42:19 AM

by Kevin Hopson

Halliburton's potentially bullish trading range could mean much higher prices in the long-term.

Security: HAL
Position: Hold

Halliburton Co. (HAL) is an oilfield services company that conducts business in more than 100 countries worldwide. For the past two months, the stock has been consolidating in a trading range between the $27.60 and $32.40 levels. Since trading ranges tend to be continuation patterns and the stock's long-term trend is positive, Halliburton could eventually see a break to the upside. If so, the stock could make its way up to the $42.00 to $47.00 range in the long-term.

This price target assumes that Halliburton will test the top channel line again (for a third time) and proceed to break out from there. Since trading ranges tend to break in the direction of the fifth channel line test, there is some validity to this. A fifth test occurs when prices test the top and bottom channel lines twice in alternate sequence, then on the fifth test the stock normally breaks out of the channel. As you can see in the six-month chart, Halliburton has tested the top and bottom channel lines two times each (or four times overall). This means that the fifth test - having to be in alternate sequence - would likely be the top channel line.

Graphic provided by: Stockcharts.com.

We can calculate a price target by taking the estimated number of times that the stock will test the top channel line before breaking out (3), multiplying this figure by the width of the trading range ($32.40 - $27.60 = $4.80) and adding this ($4.80 x 3 = $14.40) to the bottom ($27.60 + $14.40 = $42.00) and top ($32.40 + $14.40 = $46.80) channel lines. When you do this, you come up with a rough price target of between $42.00 and $46.80.

Although it may be safer to wait for confirmation of a breakout, buying support could still prove beneficial in the near-term. For example, notice how Halliburton recently bounced off its 150-day moving average ($27.64). This is also the site of the stock's bottom channel line and significant front-month (May $27.50) put option open interest. Halliburton should continue to find key short-term support in the $27.50 to $28.00 range. In anticipation of higher prices long-term, investors might consider accumulating shares of Halliburton on further weakness. In the meantime, I would continue to hold.

Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.

	Glen Allen, VA
E-mail address:	hopson_1@yahoo.com

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Halliburton's Bullish Consolidation Pattern

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