(Click on image to enlarge)

Today’s chart provides a beautiful example of one of the most powerful charts in technical trading: The inverted head and shoulders. The stock profiled is Nabors Industries Inc.(NBR), which trades on the NYSE.

Often referred to as a head and shoulders bottom, an inverse head and shoulders is a pattern used to predict the reversal of a downtrend. In this pattern, the price falls to a trough and then rises; this forms the left shoulder. The price then falls below the former trough and rises again, forming the head. The price then falls again, but not as far as the second trough; this creates the right shoulder. Once the final trough is made, the price heads upward, toward the resistance found near the top of the stock’s previous high – in this case about $16, the price in May 2015, which is not visible on this chart.

Nabors Industries owns a highly diversified land-based drilling rig fleet in North America, and in general provides drilling and other services to the petroleum worldwide. In the present environment of rising oil prices, it fleet of rigs and drilling-related equipment is benefitting from rising oil prices – a pattern shown in the concluding chart.

One of the sweet features of this play is that it is focused on light oil, mostly onshore. That oil is relatively cheap to produce (compared, for example, to bitumen from Canada’s oil sands), and quick to get to market. On a North American scale, with a fleet of some 430 rigs, Nabors is a big player in the sector.

I bought some shares in this stock when it broke through the red and green auto support/resistance line, after waiting for a few days to see whether this breakout was really real. I’ll sell some, at least, when the shares hit about $16.

If you don’t yet believe the oil price crisis is over for that industry (at least until the next bust!) please take a look at the following oil price chart.

(Click on image to enlarge)