EOG Resources, Inc. (NYSE: EOG) is currently showing a positive trend on the monthly chart with a bullish Elliott Wave pattern. The company is in a strong long-term upward trend that started from its lows during the pandemic, indicating a strong bullish phase. EOG has completed a full market cycle, with red Waves I and II already in position. After Wave II ended at the pandemic bottom, EOG began Wave III, which is known for significant price increases, supported by patterns from the 2020 low.

Wave Structure Analysis

The rise from 2020 is taking shape as an impulsive move in red Wave III. The internal structure, marked in blue, consists of waves (1), (2), (3), and (4). Waves (1) and (2) created an upward trend, while Wave (3) provided strong momentum, consistent with typical third wave patterns. Wave (4) is either almost complete or still developing. EOG Resources has traded within a narrow range, indicating a consolidation phase referred to as Wave (4). This sideways movement is happening within a larger, powerful bullish trend that started from the 2020 lows. The market seems to be building energy for its next major upward move. The fundamentals support this bullish technical outlook. WTI crude prices recently stabilized above $88 per barrel, a level we didn’t see for much of late 2025. Moreover, EOG’s investor guidance from late last year projected a slight production increase for the first half of 2026. This combination of solid energy prices and stable operations increases the likelihood of a technical breakout. In the upcoming weeks, we are considering near-term call options to prepare for a potential breakout. March and April 2026 contracts could provide an opportunity to benefit from a move towards the initial target of $168.49. This strategy allows for leveraged exposure if the stock begins its next upward wave.

Managing Investment Risk

However, we should be cautious, as implied volatility in the energy sector remains high due to uncertainties experienced in mid-2025. To manage higher premium costs, using bull call spreads may be a smarter approach. This involves buying a call option while simultaneously selling another one at a higher strike price to lower the initial investment. Reflecting on the strong rally in 2022, during the previous Wave (3), we see how quickly this stock can rise once it breaks out of its range. A sustained move above the current consolidation highs will be the key indicator we are monitoring. Historical price behavior suggests that if a breakout occurs, momentum could quickly build. Create your live VT Markets account and start trading now.

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