Will Halliburton Company (HAL) Fall on Earnings?

Halliburton Company (HAL) is a Houston based oil and gas exploration and production company. At the time of this post (9:50AM CST) HAL is currently trading at 38.80, up 3.94% on the day. The stock is currently just off of the lows of its 52 week trading range of 37.21-74.33. HAL has seen a steep decline in stock price since late July, as its high correlation to the deteriorating price of crude oil futures has weighed heavily on the company’s share value. HAL is scheduled to report earnings on Tuesday, 1/20/2015 before the opening bell.

Over the last eight quarter of earnings data available, HAL has traded relatively bullishly, moving higher on five out of eight sessions immediately following the EPS release. The average historical move over this same time period has been a relatively modest 2.7%. Currently, the options market is pricing in a slightly larger than average anticipated move of approximately 5.38% based on the price of the ATM straddle. This would represent about a 2.10 directional move in the price of the underlying stock by next Friday’s weekly options expiration. HAL is currently trading well below the downward sloping Ichimoku Cloud and all relevant moving averages on the daily chart, and continues to show little to no strength along with most oil and gas affiliated stock names. With seemingly no end in sight for the declining prices of crude oil, and weak earnings reactions emerging from throughout the sector, I will be leaning bearish HAL going into Tuesday’s earnings report, and looking to establish a short position going into today’s close.

Potential trade: Buying the HAL Jan 23rd Weekly 37.5-36.5 Put Spreads for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $37.25