A LONGER TERM LOOK AT BAKER HUGHES

BHI HAS JUST HIT ALL-TIME HIGH... During my Friday evening interview on the Nightly Business Report, I recommended the Oil Service Holders (OIH) and Baker Hughes. I pointed out that BHI was the biggest holding in the OIH which had just exceeded its 2000 peak. They showed a 52-week chart of Baker Hughes (Chart 1) which gives the impression of an over-extended stock. I explained, however, that the stock had just exceeded its 1997 peak and looked very bullish. The monthly bars in Chart 2 show what I was trying to describe. It shows BHI having just exceeded its 1997 peak at 48. The converging trendlines show a seven year symmetrical triangle that was completed about a year ago. That pattern yields an eventual upside target to 72. That objective is found by measuring the height of the triangle at its widest point (48-16=32). That total (32) is added to the breakout point near 40 yielding a target to 72. In my view, the major bullish breakout on the monthly chart overrides the extended look on the daily chart. With some help from a brokerage upgrade, Baker Hughes is up 3% this morning and is the top gainer in a strong energy group. Crude oil is trading over $60 for the first time in history.

Chart 1

Chart 2