Schlumberger Ltd. (SLB) reported Q3 Non-GAAP EPS of $0.43 this morning which beat by $.03 and revenue came in at of $8.54 billion (+0.5% Y/Y), also better than expected according to media reports. The energy sector has been beaten down the past several months as crude oil prices have been weak.
In this daily bar chart of SLB, below, we can see bottoming price action with SLB holding in August and October. Prices are poised to test and probably break above the declining 50-day moving average line. The slower-to-react 200-day line last tested from the underside in September but the next test may well break above the line.
The On-Balance-Volume (OBV) line is still pointed down but has started to show some promise of a reversal this month.
The 12-day price momentum study shows a bullish divergence with a low in August and a slightly higher low in October while prices made equal lows. This difference in the indicator versus the price action tells us the October retest was different from the August low and this can foreshadow a rally.
In this weekly barf chart of SLB, below, we can see some bullish divergences that tell us to look at the long side of SLB after its long decline. Prices are still below the 40-week moving average line but we know this is a lagging indicator.
The weekly OBV line has not made a new low since December of last year so we have a large divergence between the indicator and the price action this year - prices making new lows but the indicator is not. Selling pressure is drying up.
The 12-week price momentum study shows a pattern of higher lows from January to now while prices made lower lows - this too is a large divergence and tells us that the pace of the decline slowed. This too can foreshadow a rally ahead.
In this Point and Figure chart of SLB, below, we can see a double bottom at $30.71 and an initial upside price target in the $38 area.
Bottom line strategy: SLB has been bottoming quietly since August. Traders and investors could go long here risking a new low close below $30. $38 is our first upside target.
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