During last Thursday's Mad Money program Jim Cramer took a look ahead to a select list of companies that are due to report earnings this week. Rounding out the week is oil service giant Schlumberger Ltd. (SLB) on Friday.
Let's check out the charts of SLB to see a bullish technical strategy is warranted.
In the daily bar chart of SLB, below, we can see that prices have been under selling pressure for the past 12 months. Its slump in February and March was part of a longer-term decline. Trading volume really surged in early March as prices gapped lower and crude oil futures gapped below $40/bbl. The slopes of both the 50-day moving average line and the 200-day moving average line are both negative but that should not be a surprise to anyone following the decline in the price of oil.
The On-Balance-Volume (OBV) line is showing some improvement from the middle of March, however, it is going to take further signs of aggressive buying to tell investors looking out several quarters that SLB can be bought at these levels.
The Moving Average Convergence Divergence (MACD) oscillator crossed to the upside last month for a cover shorts buy signal but an outright go long signal does not look likely at this juncture in time.
In the weekly bar chart of SLB, below, we can see that prices have made a long and life-threatening decline the past three years. The 40-week moving average line has been pointed down for much of the past three years.
The weekly OBV line reached a new low in March to keep its three-year downtrend going. It is going to take several months of a positive OBV line to give us an "all clear" signal.
The MACD oscillator has begun to narrow but a cover shorts buy signal is going to be weeks away.
In the Point and Figure chart of SLB, below, we used daily price data to construct the chart. A couple clues jump out.
The chart shows a potential upside price target of $30 but of course there is no timing on when that might happen. We can see that the $30 area is the start of a band of overhead resistance looking at the volume by price bars on the left scale.
The price base so far is not all that impressive in size so I would anticipate that we could see the $15-$13 area retested in the weeks ahead.
Bottom-line strategy: Traders need to remind themselves that oil prices and stock prices are a battle between bulls and bears. The bears have been in control of oil prices for a long time but a turnaround is finally taking hold. This won't be a "V" bottom in crude oil and the bottom in SLB is likely to stretch on for many months. Take your time with any new purchases.