Thursday, July 30, 2015

Schlum' in the Slump

In an oil slump, I have constantly stated and restated the importance of finding winners in the muck of low revenue and dipping profits. Especially in the exploration and operation sector, the key to solid financials is established infrastructure and a diversified base. One company that has stuck out in the year of 2015 is Schlumberger Limited based in Paris, France and traded on the New York Stock Exchange. Stretching across 85 countries, SLB's almost imperialistic hold on their operations is impressive. With their specialization in technological breakthroughs, project management, and tireless exploration, no company has success entrained in their methods more than the French corporation. As of today, its stock jumped $1.39 to $83.89 for a 1.68% gain on the day, a likely reaction to a positive movement in crude oil prices. This jump came during a turbulent time for the oil industry as drops in revenue threaten profitability with low prices, but SLB's earnings revealed what a strong company looks like.

Despite an initial plunge in earnings per share when oil prices were first hit by the supply glut, Schlumberger rebounded significantly in the following quarters. The 2015 Q2 reports showed a 271% recuperation of earnings, encouraging investors to buy into solid profits with a valued dividend. Since the beginning of the year, SLB's pretax income has shone growth of 95.5% to $1.44B further fueling positive sentiment for buyers looking for a winner. The chart says it all. The earnings report saved SLB from a deadly dropped and neutralized the threat of a downward trend.


After major selling in the crude oil market sent prices into the $40's, SLB's price suffered and continued to be dampened through the positive Q2 report. Ever since, the stock has been whipsawing its way through the month of July as infighting between negative sentiment from the commodity's market wrestles with positive sentiment from the earning's surprise, but slowly, crude pressure is being alleviated with the WTI benchmark showing gains over the past two days. The RSI index actually shows how this stock is ready to burst forth to reap the rewards it deserves from solid financials. Two dips below 30 in early July introduced gains to an underbought security being trampled by speculation. As we see stabilization in the price for crude oil, I would look to see a retracement of June losses in the next month or so. In a bearish outlook, I see price levels testing the Bollinger ceiling at $85.75, possibly $86.00. A bullish perspective, given strong momentum and oil prices back in the $50's with a decrease in U.S. supply data, would suggest a breakthrough past the Bollinger ceiling to reunion with the SMA level at $87.18, and pending further speculation, an upward trend that could reward trader's faith in good financials with some quick profits.

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