While most stocks have been firmly entrenched in a downtrend for multiple months, times are a-changin�, as many stocks are attempting to follow in the footsteps of the S&P 500 Index by reversing trends.
One such stock shaping up nicely with a potential trend reversal is Schlumberger Ltd. (NYSE:SLB). After ripping higher through the first half of October, SLB has been forming a clean high base at the 50-day moving average.
A successful break of $71 could lead to higher prices in the short term for this oilfield services company. The lower end of the two-week consolidation area provides a logical area for a stop-loss around $67 if the breakout fails.
While stock enthusiasts may consider simply buying shares on a confirmed breakout, option traders should consider purchasing calls or call spreads. The more-aggressive route would be to buy the SLB Dec 70 Calls, which are trading around $6.30 right now.
Those looking for a more-conservative play should consider buying the SLB December 70-75 call spread by buying to open the SLB Dec 70 Call and, at the same time, selling to open the SLB Dec 75 Call, which is currently trading at $3.30. At these prices, you can enter the spread for about $3 ($6.30 debit from buying the $70 calls – $3.30 credit for selling the $75 calls).
Source: MachTrader
At the time of this writing Tyler Craig had no positions on SLB.
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