These Oil Service Stocks Are Ready For A Move Higher (OIH, SLB)


Over the past week, many commodity traders have been turning their attention to the oil services sector, as measured by the Market Vectors Oil Services ETF (OIH). As you can see from the chart below, active traders have been trying hard to establish a floor and the double bottom pattern that is appearing on the chart suggests that a short-term reversal could be underway. The bottom of the pattern near .50 has acted as a strong level of support and traders will likely use this level in determining the placement of their stop-loss orders since it offers an intriguing risk/reward ratio. A break above the swing high of .11 would likely lead to an influx of buy orders, which could drive the price to the previous highs near . (For more, check out: Analyzing Chart Patterns: Double Top and Double Bottom.)

OIH Fund Fundamentals
For those unfamiliar with the OIH ETF, the fund has total net assets of .1 billion and holds 26 of the largest publicly traded oil services companies. The net expense ratio of the fund is 0.35% and is peculiar to a specific group of risk-seeking traders since it has actively traded options chains. (For more, see: Buy Discounted Oil Service Company Stocks.)
For traders who want to create a watch list of quality oil services companies, one option is to investigate the top holdings of a fund such as OIH. Interestingly, the top five holdings of the OIH fund consist of just over half of the weighting of the portfolio. For traders interested in this sector, these five companies are probably the best place to start your research:

Company

Weighting (%)

Schlumberger Ltd. (SLB)

19.89

Haliburton Co. (HAL)

11.97

National Oilwell Varco Inc. (NOV)

7.78

Baker Hughes Inc. (BHI)

5.55

Cameron International (CAM)

4.87

Source: vaneck.com

By analyzing the chart of Schlumberger Ltd, you can see that the bulls were able to push the price above a significant resistance level shown by the dotted descending trendline. The recent price action near the trendline and the bullish crossover between the MACD and its signal line (blue circle) suggest that the bulls are attempting to reverse the trend and this sentiment will likely continue until the price closes back below the trendline. From a risk management perspective, current price levels are offering traders an interesting risk/reward ratio based on the proximity of the support. (For more, see: Support And Resistance Reversals.)

Consolidation or a sideways trending price is a common price pattern used by active traders to confirm a trend reversal. As you can see from the chart of Haliburton, the sideways price action over the past several months has triggered the creation of a strong area of support near the lower trendline. As was the case above, the crossover between the MACD and its signal line (blue circle) combined with the bullish move towards the swing high suggest that the bulls are in control of the momentum. A close above .16 would likely cause a f
These Oil Service Stocks Are Ready For A Move Higher (OIH, SLB)