Time to play oil stocks.

Get back into those oil names. 

The markets have obviously discounted oil services -- particularly of late, as revenue projections for one of my longs, Schlumberger (SLB) for this quarter became muddled at the Wells Fargo Energy Conference in San Francisco last week. Apparently, there will delays in drilling several projects in Saudi Arabia, Iraq and India. Still, Schlumberger expects to mobilize some 30 rigs internationally this quarter, with an additional 25 next quarter.

Fellow oil services giant Halliburton (HAL) sold off late last week, along with Schlumberger, and with the sector in general.

My thinking is that with oil prices getting somewhat wobbly due to prospects for increased global output, that there still is ongoing increased global demand. Emerging economies are likely to remain a long way from relaxing their needs for fossil fuels. At home, in the Permian, there is still a bottleneck that prevents all of the WTI produced from reaching markets. Short term, I would think oil services less susceptible to market pricing of the commodity than explorers.

This morning, there seems to be some relief seen in crude pricing as talk of an OPEC compromise spreads. My thought is that at these weaker prices this may be a good time to take action in the services space.

I remain long both Schlumberger and Halliburton. Both still trade, even with the recent slide above my basis, Schlumberger well above my basis. Would I consider violating basis on a news week like this? I might, but not blindly, and not solely through the use of equity.

Schlumberger has traded sideways in 2018. One quickly sees that the shares have hit a spot where both the 200-day simple moving average and a Fibonacci 61.8% re-tracement (April through May) level come into play as potential support. Failure here would allow for the stock to fall as far as the $62 level, which would be a 100% retracement. I really do not want to add equity up here to a position that looks great on paper. However, I would eagerly add at that lower level.

Airlines are not just tied to oil prices, says one top sector analyst.

Let's take a look at puts expiring in about a month.

Keep in mind that Schlumberger is expected to report its second quarter prior to the opening bell on July 20. On Friday, July 20 $62.50s went out at $0.49. If the shares get smacked around, that would at least allow me the ability to add at 62 (ish). If the shares find support here, at least I got someone to buy my lunch. The July 20 $60s went out at $0.22. By making a minimal sales of both items, the trader exposes him or herself to having to buy 200 shares at an average equity price of $61.25, less the premiums raised, which would have averaged about $0.35, so the net would be a rough $60.90.

If one liked the shares around $66.50, would one risk having to purchase them at $60.90?

P.S. Halliburton cracked the 200-day SMA on Friday. I need a little more of a discount there (say 44/45) in order to add. Schlumberger is the more important of the two on my book, and thus will claim the lion's share of my focus in this space.

Schlumberger is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells SLB? Learn more now.