If you've followed my blogging and shows, then you know how bullish I've been and still am. During all the trade war, Fed, recession, and political worries, I've called for new all-time highs. I'm not stopping there. Don't be shocked if you see the S&P 500 hit 4040 in 2020. If you think I'm crazy, have no fears, you're likely not alone! :-)
In an effort to bring you completely unbiased predictions for 2020, however, EarningsBeats.com is very excited to announce its first annual financial conference, "Market Vision 2020" (MV2020). I believe it will be the PREMIER financial conference of 2020. We're currently assembling a "Who's Who" list of speakers and I'm confident we'll soon be announcing an awesome Keynote Speaker as well. We've created a free newsletter for MV2020 and will be providing details of the event as they unfold over the next several weeks. There will be many benefits for signing up to the newsletter including:
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I believe 2020 will be big and there are plenty of leaders that I could discuss. But what about the laggards? Are there any stocks suggesting that they should be worthy of consideration after a not-so-stellar 2019? While it's not really my style to unlock value, I'll give you my thoughts on a company that could be poised for a 2020 turnaround. I looked only at companies that currently have a SCTR score below 10 - a true bottom-fishing expedition. Halliburton (HAL) is one that I quickly found interesting. Here's my thought process on this one:
Theme #1 - Energy Rebounds
I believe there's a very good chance that global economic growth in 2020 is better than most expect. That would likely lead to higher crude oil prices ($WTIC). I see a potential symmetrical triangle forming on the WTIC, which is a bullish continuation pattern that we'd expect to break in the direction of the prior trend, or higher in this case:
Improving global economic conditions certainly could lead to a resurgence in crude oil prices and energy shares.
Theme #2 - Weakening U.S. Dollar
There's a second potential catalyst and that's a weakening U.S. Dollar Index ($USD). Longer-term, I'm bullish the USD, but there's a divergence in play right now that could lead to temporary weakness and that could be the 2020 spark for energy strength. There's a very strong tendency for the USD to trend in the same direction as the difference in the 10 year treasury yield between the U.S. and Germany. Check out this chart:
The U.S. 10 year treasury yield ($UST10Y) had seen an increasing spread vs. the German 10 year treasury yield ($DET10Y) throughout much of the last 10 years and that's resulted in a strong dollar and relative weakness in energy (XLE:$SPX). While the 10 year treasury yield here in the U.S. has been rising of late, it's not rising as fast as the German 10 year treasury yield. That's resulted in a negative divergence and negative, or inverse, correlation as the dollar continues unabated to the upside (final red shaded area on the right side of the chart). My second argument for relative strength in energy revolves around the idea that we'll see the USD pull back toward its 8 year trendline support (dark red circle) to resolve the negative correlation that's currently in place. A weaker dollar, even if just temporarily, would provide tailwinds for an energy group that could also benefit from increased global economic activity.
That's where HAL comes into play. HAL performed well when crude oil moved up in 2016 and 2017, but it's been crushed ever since. It doesn't hurt that HAL sports a nice 3.54% dividend yield. Here's a current look at that long-term chart and the visible technical damage inflicted over the past 1-2 years:
I've highlighted HAL during 2016 with the blue-dotted vertical lines, because that was the last time that the market aligned bullishly for energy stocks. If you check out the dollar chart earlier, you'll see that the USD was declining throughout much of 2016 and that led to outperformance in energy. HAL doubled in price during 2016. Now HAL finds itself in a similar position, but will it end the same? Keep an eye on the U.S. Dollar Index ($USD). A sudden shift to the downside could open up the possibility of a major advance higher in energy shares and, in particular, HAL.
In my Monday, EB Digest article, I'll point out a healthy energy stock that recently beat Wall Street estimates as to both revenue and earnings. It gapped higher on big volume and has since pulled back to test both gap and trendline support. It represents more of a momentum play in energy if that's what you prefer and it's currently at a solid reward to risk level for entry. CLICK HERE to sign up for this free newsletter and receive this energy stock on Monday morning before the opening bell.
Happy trading!
Tom
