Will Schlumberger Break to New Lows on Earnings?

Schlumberger will be the first company in the energy sector to report earnings when it does so on Friday. Can the stock avoid a breakdown?
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The energy space has not had an easy run, Schlumberger  (SLB) - Get Report included. The company will report earnings on Friday before the stock markets open, giving investors a look into how the sector has been faring.

One thing is for sure: Expectations aren’t very high.

Typically, that sets up well for bulls. When expectations are low, companies tend to surprise to the upside. Even disappointing results can come in ahead of the worst-case scenario outlook and cause a quick bidding war in the stock price.

The problem with Schlumberger is the energy sector. Simply put, the oil market is a tough business right now, with instability, lackluster demand and heavy supply.

On the plus side, there have been some reports of M&A picking up. But by and large, this sector still has a number of headaches.

Trading Schlumberger

Daily chart of Schlumberger stock.

Daily chart of Schlumberger stock.

On the chart above, you’ll notice the absolutely dreadful decline Schlumberger suffered in February and March. While shares about doubled from the coronavirus low to the June high, it’s been downhill ever since. Literally.

Schlumberger stock continues to make a series of lower highs, as several resistance points continue to guide it lower.

Earlier this month, shares opened below the key $15 mark, but reversed hard. The stock rallied 3.7% that day, on October 2nd. For bulls, this was a positive step, as a close below this mark would have opened the stock up to a possible test of the March lows near $11.70.

However, for bulls to gain any ground, they must reclaim the 20-day moving average and the current October high at $16.60.

If the stock can do that, then it opens the door to a push for higher prices. Specifically, it puts the 50-day moving average, the 23.6% retracement at $18.37 and downtrend resistance (blue line) in play.

I would be surprised if shares pushed through this area on the first try, but even if the stock can’t, it would still represent about 14% upside from current levels.

On the downside, the $15 level remains critical. A close below this mark and the October low at $14.52 sets up Schlumberger for a possible retest of the 2020 lows.

Is that where stock is heading? Only if it breaks $14.52. Keep an eye on this level, as well as the 20-day moving average and $16.60 on the upside.