Is Schlumberger Headed Even Lower? Plus Jim Cramer's View
Shares of Schlumberger (SLB) - Get Report have been in a steep slide since the April close. Today the stock is working on its sixth straight decline as it continues to drop further below its 200-day moving average.
Despite the damage so far this month, more is likely ahead. For patient Schlumberger investors, a test of key support just below $72 could provide a low-risk entry opportunity.
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Schlumberger's powerful breakout move back on April 13 sparked the final leg of the stock's bull move off the January low. This phase drove shares up to a very heavy resistance zone near last summer's low. The stock stalled in this area, between $80 and $82, in mid-April before finishing the month with a narrow consolidation. As May began, Schlumberger was completely exhausted as overhead pressure began to build. The result has been a deep pullback that has violated multiple layers of support along the way.
Following this week's sloppy beginning, patient Schlumberger investors should expect more downside. A retest of a key support zone is soon approaching. This area includes the stock's March and April lows between $71.70 and $71.30. With selling pressure beginning to ease and the stock returning to a neutral moving average convergence/divergence reading, a hold near this area appears likely.
Schlumberger bulls should consider the stock a low-risk buy if a base begins to form here. A close below the $70 area would indicate that more work needs to be done before shares can regain their footing.
From a fundamental perspective, Schlumberger is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. "Down here it represents terrific value," said Cramer, which "is why we own it for the trust from these levels."
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long SLB.
