It’s an uncertain time for Baker Hughes Incorporated (NYSE: BHI) shareholders. Of course, the oil market collapse has created plenty of uncertainty to go around, but Baker Hughes is a special case.
Baker Hughes’ failed merger with Halliburton Company (NYSE: HAL) is a perfect example of the type of uncertainty Baker Hughes traders have gotten used to. News of the deal initially sent shares of the stock surging back in November of 2014, but the move was short-lived. From day one the market was skeptical that the deal would go through.
Even when the merger was challenged by the U.S. government and subsequently abandoned by the two companies, the market still didn’t seem to know what to make of Baker Hughes. On one hand, there would be no buyout at a large premium to market price. On the other hand, there would be no lengthy court battle with the Department of Justice. Baker Hughes would receive a $3.5 billion breakup fee from Halliburton, but it would once again be competing head-to-head with Halliburton in a sluggish North American oil market.
There were even rumors swirling that National-Oilwell Varco, Inc. (NYSE: NOV), General Electric Company (NYSE:GE) or others could potentially step in to buy out Baker Hughes now that Halliburton is out of the picture.
From a technical standpoint, Baker Hughes bulls have plenty of things to be positive about. The stock seems to have found strong support for the time being at around the $38 level, a price at which it formed a bullish double bottom in January and April. Since forming the double bottom, the stock briefly surged above $50 before settling back into a narrow sideways trading range in the past month or so.
Unfortunately, while Baker Hughes appears to have found a bottom, it has yet to make a meaningful transition to a bullish up-trend. This sluggishness wouldn’t seem so bad were it not happening in such a relatively strong recent oil market environment. Crude prices have been on fire since their February lows, and rivals Halliburton and Schlumberger Limited. (NYSE: SLB) have both generated bullish golden crosses in their charts in recent weeks. If Baker Hughes’ share price can’t rise in this environment, bulls must wonder what it possibly would take for a significant push higher.
In the near-term, traders are watching resistance at around $47 and support at around $44. A breakout to the upside could mean that Baker Hughes has finally turned the corner and is headed to $55 or higher. A breakdown below $44 would likely mean a re-test of $38 support.
Disclosure: the author is long BHI.
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