Schlumberger May Be Approaching A Technical Breakout 7 Months In The Making

By: Wayne Duggan

After hitting 13-year lows back in February, oil prices doubled from $26/bbl to nearly $52/bbl by the first couple of weeks of June. The oil rally drove turnarounds in oil services stocks like Schlumberger Limited. (NYSE: SLB).

Schlumberger’s stock is up 9.3% since Feb. 14, but it has severely lagged the gains of WTI crude oil in that time. With very few analysts predicting significant upside to oil prices in the near-term, is Schlumberger’s stock now at risk of a sell-off?

The Ascending Triangle

One look at Schlumberger’s chart shows that a much more bullish development has been happening in the past seven months. While it’s true that Schlumberger has failed to break above $81 resistance on three separate occasions since late 2015, it’s increasingly higher support levels are very encouraging.

The technical pattern formed when a stock has both a horizontal resistance line and an upward-sloping support line is called an ascending triangle. The ascending triangle is a very bullish formation and can signal a reversal following a long-term downtrend like the one that Schlumberger has endured in recent years.

The pattern indicates market accumulation. The idea behind the formation is that buyers are unwilling to pay more than $81 for Schlumberger in the near-term, but sellers are increasingly unwilling to sell the stock at lower prices. If the pattern continues to hold, the stock will trade in an increasingly narrow range until the support and resistance lines converge at $81 forming a triangle.

Levels To Watch

The two levels to watch for Schlumberger traders in the near term are the support line at around $72.40 and the resistance line at $81. Until the stock breaks outside of one of those two lines, the ascending triangle is still in play.

A breakout above $81 likely means that Schlumberger will make a run at the $92 level that served as the stock’s 2015 high.

In the longer term, the price projection following an ascending triangle breakout is typically equal in magnitude to the widest part of the triangle itself. In Schlumberger’s case, that width is roughly $22.60, meaning the new longer-term target would be around $104.

Below $72.40, the next potential support level is May’s low of around $71.50.

Breakout Confirmation

If Schlumberger does eventually record its bullish ascending triangle breakout above $81, traders will be looking for confirmation that the move is for real. High volume typically accompanies big technical breakouts. In addition, after a true breakout, the $81 resistance line will turn into a support level for the stock, and any pullback to the $81 level should hold.

Disclosure: the author is long SLB.

Lightspeed Financial Services Group LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lightspeed Financial Services Group LLC does not endorse, offer nor recommend any of the services or commentary provided by any of the market commentators/educators or service providers and any information used to execute any trading strategies are solely based on the independent analysis of the user.

You may also be interested in...

The IPOX® Week, September 20th, 2021
Read More
Understanding the Basics of Option Pricing
Read More
4 Tips for Maximizing Trading Returns
Read More
The IPOX® Week, September 13th, 2021
Read More

Try the demo

Compare Platforms
Check the background of this firm on FINRA's BrokerCheck

Our website uses cookies to improve the performance of our site, to analyze the traffic to our site, and to personalize your experience of the site. You can control cookies through your browser settings. Please find more information on the cookies used on our site in our Privacy Policy. By clicking OK, you agree to allow us to collect information through cookies.