Schlumberger Is Still Searching for a Low

 | Aug 22, 2017 | 11:17 AM EDT
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We have covered Action Alerts PLUS holding Schlumberger (SLB) and other energy names the past two years and have become frustrated as various technical signals have not resulted in any meaningful price strength for the most part. This does not mean our indicators and technical analysis are not useful, but rather the downtrend has been the overriding force and I did not give it more weight in my approach. I imagine that a fundamental analyst could be frustrated recommending an undervalued security that stays undervalued.

We looked at the charts and indicators on SLB last week and summed up our thoughts: "The bullish divergence between price and momentum has gone on for over three months. A potentially bullish candlestick pattern adds to the mix. A bullish candle pattern today would 'confirm' the inverted hammer and could be a bottom reversal. Aggressive traders could probe the long side of SLB on a higher close today provided they use a reasonable stop-loss."

Traders who did go long SLB on Aug. 14 are probably still long as prices have not broken under $63. What now? Let's see what we can glean from a few more data points.

In this updated daily bar chart of SLB, above, we can see prices are still below the declining 50-day simple moving average line. Prices are below the declining 200-day moving average line, maybe too far below. The volume of trading since late April has been heavier than in previous months. Sometimes heavy volume at a price low can represent a change of ownership. Disgruntled longs can be dumping their positions and this selling is slowly absorbed by other investors with a different time horizon who may be scale-down buyers.

The daily On-Balance-Volume (OBV) line has turned flat over the past seven weeks, suggesting that buyers and sellers of SLB may be in balance. The 12-day momentum study shows that the rate of change in prices is negative and has not slowed, unfortunately.

In this weekly chart of SLB, we have mixed signals. Prices are below the declining 40-week moving average line. Prices are retesting the early 2016 low and may hold, but we will need to see an upside reversal soon. The weekly OBV line is still in a downtrend and tells us that sellers of SLB have been more aggressive on this timeframe. The weekly Moving Average Convergence Divergence (MACD) oscillator is trying to cross to the upside for a cover-shorts buy signal.

In this long-term weekly bar chart of SLB, above, we go back to 2009 to see where we might find support. Use your imagination to draw a horizontal line across $60 -- the area has acted as support a number of times since 2011.

Bottom line: A close above $64 might be the quickest short-term signal to suggest that SLB has reached a low.

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