Is Schlumberger Slipping Into a Deep Pullback?

Schlubmerger appears to have lost its early November momentum. Here's how to trade it now.
By Gary Morrow ,

Schlumberger (SLB) - Get Report appears to have lost its early November momentum. The stock quickly backed off its Nov. 3 highs after gaining 4.25% during the first two sessions of the month. Schlumberger has been trading in a tight consolidation since then while volume slowed to a trickle.

The stock is beginning to look increasingly vulnerable to the downside now. For patient bulls, entry at lower levels may not be far off.

After surging nearly 25% off the Oct. 2 low, Schlumberger ran out of steam as it entered a very heavy resistance zone. This area of $80 to $83 includes the stock's July low as well as the 200-day moving average. With upside trade easing during the last phase of this impressive move, it was becoming more likely that Schlumberger would struggle once this area came back in to play. The pullback that followed was a logical result but the current consolidation may only be a temporary stop ahead of a deeper selloff.

In the near term, investors should focus on last week's low of $75.70. If the consolidation ends with a drop below this level, a deep pullback could develop quickly. Schlumberger would be then be on course to fill the important breakout gap left behind back on Oct. 6 near $70.50. The big rebound move off the 52-week lows received a huge jolt after shares gapped to the upside that day.

For patient investors, a drift down to the support zone between $71 and $70 would produce a very low-risk entry opportunity.

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Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long SLB.

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