Schlumberger (SLB)

This analysis was requested from a special someone!

Schlumberger is an oil and gas service provider and sits in a strong sector. Its stock has been on fire lately and has made a lot of people happy. The good news is it looks like there is some more upside. The bad news is that it looks to be limited with some significant risk to the downside.

Here is the first chart, a long term look at the stock from its early days to the financial crisis, to now.



The chart is pretty much self explanatory just follow the comments in a counter clockwise fashion from left to right. Bottom line is the stock has been performing well over the last decade but has recently shown some weakness, especially in volume. The key for this stock going forward is to hold above the $73.25 high. The letters and numbers I have on the chart are a technique called elliott wave theory and help to point the direction of the next moves. The $73.25 price holds the key to this technique.

Another technique is to use trendlines to help find buy and sell points. Notice in the late 90's this technique worked pretty well as the midterm sell point around $39.00 would have saved you the entire downturn of the 2001 recession as price didn't reach that level again until 2005. This technique would have given a buy entry in 1999, a sell at the end of 2000 and another buy in 2003 around $23.00. These buy/sell lines aren't on the chart to keep it simpler, but you can imagine them by connecting major price highs and lows.

Currently the mid term green sell line is at $60.00 but rising fast. By June it will be at $68.00 and by the end of the year it will be at $77.00. Combine this with the $73.25 level and we have a pretty good profit taking point.

One final point on this chart is that volume has been declining even though price has risen. Typically this is a negative warning sign. The same thing occured at the 2010 top. Notice the green bars getting lower and lower as 2009 progressed. A similar thing is occurring now.

The next chart is a shorterm term closer look at the last 2 years. This chart helps point to the higher price levels that are expected. Be warned though, this elliott wave pattern looks just about complete and once finished prices should come back to the current $80 levels at a minimum. The blue box area is where very little volume occurred and could be a point the price could fall fast.



Trendlines are also used on this chart and there is a very steep one currently at $82. A break of this trendline would keep profits tight because of its steepness and should be considered if worried about whipsawing price. Another way to help look for a price top is thru divergences which I show on the indicators at the bottom. Similar to the topping that occurred at the 2010 new year, I will look for a lower high on the momentum indicators. If a top occurs in one of these indicators that is lower than the one in early December, then that is a good signal that momentum is waning and a high could be in.