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Why Is Baker Hughes Stock Bullish?

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Nov. 20 2020, Updated 2:45 p.m. ET

Baker Hughes versus its peers and the industry

Baker Hughes (BHI) is the third-largest oilfield equipment and service (or OFS) provider by market capitalization. It had a relatively strong run in the stock market in 2016. On December 9, BHI was trading at $66.32, which was 25% higher than its price at the beginning of the year.

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What does Baker Hughes’s stock price movement tell us?

In the past year, Baker Hughes’s stock price has trended up since early January 2016. BHI’s quarterly net income in the past four quarters was persistently weak, but its revenues showed resilience in 3Q16.

BHI’s cash flow got a shot in the arm from the $3.5 billion merger breakup fee from Halliburton (HAL). The pending merger with GE’s (GE) Gas and Oil business has boosted BHI since November.

Year-to-date, West Texas Intermediate (or WTI) crude oil price has risen 40%. This also explains BHI’s steady run during the year. You can read more about the latest crude oil prices in OPEC Mania Fading: Are the Bears Back in the Oil Market?

Baker Hughes’s moving averages

On December 9, Baker Hughes’s share price was at a 15.6% premium to its 50-day moving average (or DMA). It’s trading 35% above its 200-day moving average.

Moving averages exhibits a smoother trend following the stock’s price movement. A 50 DMA is a short-term MA, while a 200 DMA shows a long-term trend. BHI’s short-run MA has crossed over its long-run MA from August. Since September, BHI’s stock price has risen above its short-run MA. This indicates bullishness in BHI’s stock price.

Next, we’ll discuss how dependent Baker Hughes is on rig count.

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