Investors looking for a read on what comes next in the oil sector should look no further than Core Labs (CLB) , Jim Cramer told viewers during Wednesday night's Mad Money program. Core Labs is the best in the oil services arena, helping oil producers find more oil and to get the most out of every well. But last week, the company slashed its dividend from 55 cents a share to just 25 cents a share, sending its stock tumbling 12.9%.
On the surface, Core Labs' explanation seems benign, Cramer told viewers. But upon closer examination, it appears something has fundamentally shifted in the oil business. This time last year there were 1,050 oil rigs in operation. Today, there are only 773. The reason? Cramer said technology is helping each rig produce more than before. Conservation and efficiency also are helping us use less oil in the first place.
As we just saw with Iran, the oil market absorbs disruptions in supply better than ever. The U.S. and others around the globe are easily able to increase supply, keeping prices stable. This means that companies like Core Labs are simply less in demand than they were in years past and they're likely to be needed less as the world moves away from oil.
How is this impacting the charts? Let's check.
In this daily bar chart of CLB, below, we can see a decline into an August low. Prices tried to stabilize around the $45 area for a few months but gapped to the downside recently on very heavy turnover.
The daily On-Balance-Volume (OBV) line has moved sideways from August and does not suggest that there has been aggressive buying. Without a pattern of aggressive buying and accumulation (buying) the CLB chart does not look bullish.
The Moving Average Convergence Divergence (MACD) oscillator has slipped below the zero line for a fresh outright sell signal. This is not what a bottom should look like.
In this weekly bar chart of CLB, below, we can see the real damage on the chart over the past three years. This sort of loss is not repaired in the months since the August low. A durable bottom is likely to take much longer and the risk is we have not yet seen the final low.
Prices are below the declining 40-week moving average line and we can see a recent failure at the underside of the average line.
The weekly OBV line bounced but stalled out before turning lower again. Sellers have the upper hand.
The weekly MACD oscillator looks like it is crossing to the downside for a fresh outright sell signal.
In this daily Point and Figure chart of CLB, below, a potential downside price target or objective in the $26 area is being projected. Avoid the long side of CLB.
Bottom line strategy: The charts and indicators of CLB are not positive and the Point and Figure chart suggests the big decline is not over yet. Avoid the long side of CLB.