Schlumberger Fails At 50

09/30/03 09:14:29 AM

by Arthur Hill

Schlumberger (SLB) was profiled about a month ago on Traders.com Advantage. At the time SLB broke falling price channel resistance (green arrow) and appeared headed for a breakout at 50. Well, the breakout came and quickly went as the stock failed to hold above this important resistance level. The failure to hold is clearly negative, but not bearish just yet.

Security: SLB
Position: N/A

Schlumberger's September breakout was much stronger than the August breakout. After the breakout at 47 in mid-August, the stock consolidated between 47 and 50 for around four weeks. The pattern looks like a small ascending triangle (magenta trendlines). In contrast to the August breakout (green arrows), the September breakout at 50 occurred with a long white candlestick and surge in volume (blue arrows). Even though there was a modest lower shadow, the volume is clearly stronger and the white candlestick reflects strong buying pressure.

Graphic provided by: MetaStock.

Price action after the breakout reflects indecision. The stock closed higher the day after the long white candlestick and with strong volume, but the candlestick shows indecision. Notice the long upper shadow (intraday high) and modest lower shadow (intraday low). Long upper shadows formed the next two days as intraday buying pressure failed to hold and the stock closed relatively weak (red arrows). The first candlestick looks like a shooting star, which is a bearish reversal, and the second looks like a doji, which shows more indecision. As the candlesticks suggest, traders got cold feet above 50 and became indecisive.

The move back below 50 is negative, but key support has yet to fold and volume patterns are positive. With a decisive long black candlestick, SLB declined back through broken resistance and then gapped down on Friday (26-Sept). Over the last six days, there have been three up days and three down days. Notice that volume on the up days (gray volume bars) is well above that on the down days (black volume bars). This leads me to believe that all is not lost from a bullish standpoint. However, I would not give the stock a whole lot of breathing room as a move below 47 would break an important support level and put the bears back in charge.

Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

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Schlumberger Fails At 50

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