Oil Services Sector – Bullish Inverse Head and Shoulders Reversal

By | November 11, 2017

The recent price action in the VanEck Vectors Oil Services ETF (OIH) has been very constructive and could been signaling a reversal in its long term downtrend.

An inverse head and shoulders pattern has been forming on the weekly chart under neckline resistance in the $26 area. The inverse H&S pattern is made up of a low in the stock price that forms the left shoulder of the pattern, followed by a second decline that forms the head, and finally a higher low that forms the right shoulder. This takes place below a well-defined level of resistance known as the neckline.

The inverse head and shoulders formation represents a transition from bearishness to bullishness. It is often seen at the conclusion of a downtrend and is one of the more reliable candle patterns.

The weekly MacD on the OIH chart made a bullish crossover in September and the Chaikin money flow reading is now in positive territory. These are reinforcing signs of improving price momentum and buying interest.

The fund closed the week just below neckline resistance. A weekly close above it, however, and a subsequent move over the 40 week moving average, would suggest a major shift in the direction of the trend.

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