Shares of oil services giant Schlumberger Limited (NYSE:SLB) are beginning to show more constructive signs across multiple time frames. After an exhaustive 14-month selloff, SLB stock might have made its way through the majority of a medium-term bottom-building process — something you can capitalize on through long positions once Schlumberger breaks past resistance.
When Schlumberger reported its results for the third quarter on Oct. 15, it beat analyst estimates, though revenue still declined 33% year-over-year. During Q3, the company repurchased nearly 7 million shares of SLB stock at prices last seen in 2012, which should have positive longer-term implications for the company.
Much of Schlumberger’s fate still depends on the price of oil, but there too, a pause in the precipitous drop is likely overdue.
As a side note, the popular Market Vectors Oil Services ETF (NYSEARCA:OIH) is closely linked to the performance of SLB stock, as it makes up about 20% of the ETF’s holdings. So investors and traders looking to dabble in OIH would be wise to understand what Schlumberger is likely to do.
SLB Stock Charts
On the multiyear weekly chart, we see that although SLB stock has been on the decline since July 2014, it wasn’t until this August that it tumbled into the blue box, which makes up a lot of price history from a two-year period (summer 2011 to summer 2013). Through a technical lens, this price area should act as support.
The August drop led to oversold readings in momentum oscillators such as the Relative Strength Index at the bottom of the chart, which SLB stock last saw during the financial crisis. This, coupled with the blue box, should act as support for the stock for the time being.
On the daily chart, the technical picture is even more compelling. Note that SLB stock in early October pushed below its late-August lows, but that momentum (as measured by the MACD at the bottom of the chart) made a higher low versus its August lows. The rally in recent weeks has pushed the stock back up toward horizontal resistance (previous support) and is now coiling up below this line as well as below its yellow 50-day moving average.
Active investors could look to play SLB stock to the long side if and when the stock pushes and holds above the $77 area. This could prompt a move up toward the $83 area and the red 200-day moving average.
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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.
