Schlumberger Limited (SLB)
(12/6/07)

As crude oil attempts to hammer out a bottom in what I still regard as a fourth wave correction, SLB has been showing a strong recovery off of its own Wave (4) decline that unfolded over October-November.  While we think the rally should be a Wave (5) advance to a new high, if it proves to be only a corrective rally, some near-term upside is still being offered.

As the wave labels suggest, we're looking to play a Wave 5 of (5) rally, which if correct should lead to a new high above the 114.84 printed on October 15.  100 and 103 are immediate overhead resistance levels that should be successfully penetrated if the Wave (5) advance is in play.  Any stalls at resistance should therefore be minor under that wave count.  I'd suggest using a break above 100 for an entry, with a stop at 96.  At minimum, at even if the advance were in fact only a corrective rally, a probe of 103 should still follow, and offer some fast points.  That said, the wave pattern and current Put/Call sentiment suggest the underlying trend should be stronger.  108 and 111 are intervening resistance levels before a test of the 114.84 high.  Wave (5) should ultimately produce a new high above this.  Our short and long term models suggest the 117 area as the probable high, with further potential to 122 and 125.  

For those who find the price a bit high, the option offers a lower price alternative to trading SLB.  You can consider the February 2008 $100 Call (symbol SDBBT), currently selling for $5.70 with the Delta at 0.53, and offering some nice leverage.

©Copyright 2007 Tony Carrion.  All content presented is the exclusive property of Market Harmonics. com, which is owned & operated by T. Carrion & Co., LLC, and may not be duplicated or distributed without the express written consent of the author.