As we all know Schlumberger Ltd (NYSE:SLB) offered to buy out Smith International Inc (NYSE:SII) today. Obviously, the company that is doing the purchasing usually declines when the acquisition is announced. Today Schlumberger Ltd is trading lower by more than 3.00 points and Smith International Inc is trading higher by nearly 3.00 points. So far this is typical action and what one would expect.
The real reason that a trader should like Schlumberger Ltd at this level is simply where it is technically on the daily chart. The stock is trading down today right at it’s 200 moving average. This is also the first time that the 200 moving average has been hit on the daily chart since in many months. Often the first hit or tag of a major moving average will be a bouncing opportunity and this looks to be the case with Schlumberger.
The only negative that can be seen on this possible trade would be if oil declines sharply over the next few days. As long as oil trades sideways or pulls back in a mild fashion Schlumberger looks like a good short term bounce opportunity.
Nicholas Santiago
Chief market Strategist
InTheMoneyStocks.com
