SLB: Price channel suitable for Iron Condors and Calendar SpreadS?

Schlumberger Ltd. has recently experienced a health increase in share price, rising over 8.3% over the past week. However, I believe the price will lower back to $27.5 (-8%) over the next two weeks, representing a good opportunity for a quick play. To demonstrate this, I will be utilizing a metric that I developed and use called VoEx. VoEx measures various underlying price-directing forces on a stock. VoEx can provide insight into what direction the "undercurrents" of a stock are pointed towards. In graphical form, this comes by way of combing the stock price and VoEx in such a way that the VoEx values can tell us if a stock is overly inhibited or being propelled towards a certain price.Β  In the VoEx graphs, VoEx-daily is magenta, VoEx-trend is tan, and the price of the stock is blue. Additionally, there are two horizontal lines: the top line is the "inhibition line", and the bottom line is the "propagation line". When VoEx-daily or VoEx-trend are above the inhibition line it typically represents a price-inhibitory sentiment: the stock price's current trend (typically upwards), is being pushed against. When VoEx-daily (magenta) or VoEx-trend (tan) are below the propagation line, it represents instabilty by way of positive-feedback loop mechanisms. That's to say: the current trend is typically pushed forward. Additionally, with VoEx, other traditional metrics can be combined to create a comhrensive view of a stock. Let's have a look! Below is VoEx for SLB from 2021-09-27: https://i.imgur.com/Y5i3aJe.jpg There are several features worth noting: VoEx-daily (magenta) has spiked again with the recent increase in spike The recent "upwards channel" formation in the price has been associated with VoEx-trend migrating towards the inhibition line Combined, this demonstrates continued and persistent upwards-price resistance. The strength of price-reversion after spikes in VoEx can be seen in the expected price range graph: https://i.imgur.com/wa2Igbd.jpg Here, the price of SLB is the black line, and the blue lines represent the market's expected range for the price. Notice that since mid-july the price has stayed steadily between $30 and $27.5. Additionally, most price depreciations after nearing $30 were greater in magnitude than the market's expectation (the line went below the bottom blue line). Lastly, by converting VoEx into a quantitative metric and mapping its performance against historical data, the SNAP graphs are produced. Below is a 10-day SNAP graph prediction: https://i.imgur.com/lNtzy0C.jpg The red cross hairs is within the 95% confidence interval for negative returns over the next 10-days. This falls in line with the historical precedence of the price itself, giving more evidence for a price reversion back towards $27.5. In situations like this, iron condors and calendar spreads tend to be the best bet, depending on how you anticipate IV will play. But for now, since SLB is at the top of its cycle, bearish until $27.5 is reasonable.

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SLB: Price channel suitable for Iron Condors and Calendar SpreadS?

bearish

Schlumberger Ltd. has recently experienced a health increase in share price, rising over 8.3% over the past week. However, I believe the price will lower back to $27.5 (-8%) over the next two weeks, representing a good opportunity for a quick play.

To demonstrate this, I will be utilizing a metric that I developed and use called VoEx. VoEx measures various underlying price-directing forces on a stock. VoEx can provide insight into what direction the "undercurrents" of a stock are pointed towards. In graphical form, this comes by way of combing the stock price and VoEx in such a way that the VoEx values can tell us if a stock is overly inhibited or being propelled towards a certain price. 

In the VoEx graphs, VoEx-daily is magenta, VoEx-trend is tan, and the price of the stock is blue. Additionally, there are two horizontal lines: the top line is the "inhibition line", and the bottom line is the "propagation line". When VoEx-daily or VoEx-trend are above the inhibition line it typically represents a price-inhibitory sentiment: the stock price's current trend (typically upwards), is being pushed against. When VoEx-daily (magenta) or VoEx-trend (tan) are below the propagation line, it represents instabilty by way of positive-feedback loop mechanisms. That's to say: the current trend is typically pushed forward.

Additionally, with VoEx, other traditional metrics can be combined to create a comhrensive view of a stock. Let's have a look!

Below is VoEx for SLB from 2021-09-27:



There are several features worth noting:

  1. VoEx-daily (magenta) has spiked again with the recent increase in spike
  2. The recent "upwards channel" formation in the price has been associated with VoEx-trend migrating towards the inhibition line

Combined, this demonstrates continued and persistent upwards-price resistance.

The strength of price-reversion after spikes in VoEx can be seen in the expected price range graph:



Here, the price of SLB is the black line, and the blue lines represent the market's expected range for the price. Notice that since mid-july the price has stayed steadily between $30 and $27.5. Additionally, most price depreciations after nearing $30 were greater in magnitude than the market's expectation (the line went below the bottom blue line).

Lastly, by converting VoEx into a quantitative metric and mapping its performance against historical data, the SNAP graphs are produced. Below is a 10-day SNAP graph prediction:



The red cross hairs is within the 95% confidence interval for negative returns over the next 10-days.

This falls in line with the historical precedence of the price itself, giving more evidence for a price reversion back towards $27.5.

In situations like this, iron condors and calendar spreads tend to be the best bet, depending on how you anticipate IV will play. But for now, since SLB is at the top of its cycle, bearish until $27.5 is reasonable.

 

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read-time
2 min

27.50

Target Price

9/ 10

Confidence

1-2 Weeks

Timeframe
Share
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Earnings Release
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