Yes, Output Sequence Files from map reduce job can be compressed. There are two types compressions are allowed on sequence files.
RECORD — Compresses individual records
BLOCK — Compresses groups of records.
Generally BLOCK compression type is recommended since it compresses better.
These compression types can be configured at site level in mapred-site.xml file with below configuration property.
mapreduce.output.compression.type
The same can be configured at job level as well with below method.
SequenceFileOutputFormat.setOutputCompressionType().