Schlumberger Is Perking Up

The recent action in Schlumberger (SLB) should be encouraging for the bulls. The stock hit a significant support zone, which included the June highs, before mounting a solid rebound in mid-November. As December began, SLB had rallied more than 8% off last month's lows and filled an ugly October breakdown gap in the process. Just above $72.00, the stock was also bumping against heavy overhead resistance that had connected the September/October highs. This week, SLB has begun to push past this significant supply zone, indicating that a breakout may be at hand.

Adding to the potential bullish set up is the scooping action in both the 200- and 50-day moving averages. After containing the downside in August, September and through most of October, the 200-day moving average provided heavy resistance in last month. SLB has battled back above this level this month putting this key level back in a supportive role. If SLB can remain above $70.00 in the near term, then I expect a healthy rally will develop. The initial target is the stock's October/August peak just below $75.00. I am not in the stock at this time but believe SLB is a low-risk buy near $71.00.

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