RIG

[Terliso]

BUSINESS SUMMARY   
Transocean, Inc. provides offshore contract drilling services for oil and gas wells. It contracts drilling rigs, related equipment, and work crews primarily on a dayrate basis to drill oil and gas wells with a focus on deepwater and harsh environment drilling services. As of March 2, 2006, the company owned and operated 89 mobile offshore and barge drilling units, including 32 High-Specification semisubmersibles and drillships, 23 other floaters, 25 jackup rigs and 9 other rigs. The company also provides additional services, including integrated services. Transocean primarily provides its services in the United States, the United Kingdom, Brazil, India, and other countries. The company was founded in 1953 and is based in Houston, Texas.

RIG (short?)  

Showing a bearish pattern but this stock is in a bullish industry since 2002 (Oil & Gas)
Might not be a good one for shorting

[Terliso]

RIG (short?)  

Showing a bearish pattern but this stock is in a bullish industry since 2002 (Oil & Gas)
Might not be a good one for shorting

Alister,

Very good.   It looks way-y too obvious as a short, and I understand your fundamental concern.  Maybe it's telegraphing something 

Weekly volume on the break of the H&S top was the second heaviest in 10 years (that's as far as my charts go back).  The heaviest volume in 10 years was February 17, on the selloff to the first data point on the neckline (70.05).  That suggests confirmation of the break.

The 70.08 close, however, a hair above that 70.05, has me thinking a re-test of the broken neckline next week, and possibly a rally back inside the pattern to fill the 77.02 gap near the 50DMA.

Interesting find.  Applause.  You might want to start a folder on RIG so we can follow it.  I couldn't find one.

EDIT: I typed the target wrong on the chart.  It should be 51.40, not 50.40.

Ok then lets short RIG, $51.00 target is fine

[Terliso]

Weekly volume on the break of the H&S top was the second heaviest in 10 years (that's as far as my charts go back).  The heaviest volume in 10 years was February 17, on the selloff to the first data point on the neckline (70.05).  That suggests confirmation of the break.

You were right Melf, that was the weekly second heaviest volume for RIG

[Melf Elf]

Ok then lets short RIG, $51.00 target is fine

Alister,

That wouldn't be so bad, huh? 

Structuring the trade:

If we shorted Friday's 70.08 close and used the 80.10 high of the second right shoulder as our stop, the risk is a loss of 14.3%.  Reward if the 51.40 target gets MADE is 26.7%, or almost a 1:2 risk reward, which is okay.

But, I don't like to risk 14.3%.   

I also don't like using "a close above the 77.10 gap" as the stop.  We easily could get a close between 77.10 and the right shoulders, and get stopped out.

 

I'm going to watch RIG for now.  It might have a reflex rally back to the MAs and the gap.  I like the downside possibilities.

BTW, see the downtrend line (dotted red line) coming off the 84.05 high?  It came in on Wednesday at 79.77.   They gapped RIG above it to 79.85, busting some stops I would imagine, ran it to 80.10, then tanked it for the remainder of the week, and broke the neckline.

Rotten devils!   

[thai626]

I'm going to test the waters on this one!  BUT not without a tight stop 

Thanks for the headsup guys!  I think it may be worth the risk.......the only bad this is that it's in a hot sector.  We'll see!!

Thai

[Terliso]

Melf did you get in yet?

[thai626]

Am I the lone ranger on this play guys???      Anyone?

Come on and join the fun...........shorting is fun, i should do it more often LOL   

[LuckyFish]

Do you guys think that this has bottomed out yet?
The stock has been slammed and looks oversold.  I'm looking for a bounce back to the low 70's.
Thanks,
Brigitte

[thai626]

   I think the bleeding may halt at around 63.  At least for a while.......but I dont' think the bleeding is totally over yet.  What do you guys think?   

I'll be covering my short hopefully at 63.2, then may go long for a few days.

[Melf Elf]

Melf did you get in yet?

Alister,

No.  I couldn't structure a trade that I liked:

Structuring the trade:

If we shorted Friday's 70.08 close and used the 80.10 high of the second right shoulder as our stop, the risk is a loss of 14.3%.  Reward if the 51.40 target gets MADE is 26.7%, or almost a 1:2 risk reward, which is okay.

But, I don't like to risk 14.3%.   

I think the bleeding may halt at around 63. At least for a while.......but I dont' think the bleeding is totally over yet. What do you guys think?

I'll be covering my short hopefully at 63.2, then may go long for a few days.

Hey, thai!

The pattern off the August 15 low looks like a Bear Flag/Bearish Rising Wedge, back to the broken neckline.  If it's a Bear Flag, and if we create a line connecting the tops that is exactly parallel to the line connecting the lows, the top of the Bear Flag comes in today, August 28, at 70.944.

This pattern also could be a Bear Rising Wedge that doesn't get back to the neckline, or that drags out for awhile, headed back toward the neckline. 

Oil is down 2% this morning.   I'm watching this pattern at this point.  Good luck! 

Do you guys think that this has bottomed out yet?
The stock has been slammed and looks oversold. I'm looking for a bounce back to the low 70's.
Thanks,
Brigitte

Brigitte,

That was a nice read.  August 14 was the closing low for the move down off the $80 high.  Applause.

[Melf Elf]

The pattern off the August 15 low looks like a Bear Flag/Bearish Rising Wedge, back to the broken neckline. 

Instead of making an immediate bid for the broken neckline, RIG sold off for a few days, put in a W-Bottom, then made the bid for the neckline, which came in on Friday, September 1, at 71.183.  The high on the day was 71.18.

The W-Bottom breakout above 69.46 puts a target of 73.81-74.10 IN PLAY, depending on whether we use the left leg or the right leg of the "W" to measure the target. 

In my experience, targets that are against the dominant trend are less likely to get MADE, especially when they are as "skimpy" as this one is.  The W-Bottom only is about one-month of trading, and it has to go up against seven-months of players who were caught holding above the neckline of the H&S Top.

Nevertheless, I've seen those get MADE.  Specifically, it brings ASTM to mind, which in March of this year, had a similar six-week W-Bottom bullish breakout that had to go up against thirteen months worth of resistance. 

I'll post the ASTM example next.

[Melf Elf]

On February 9, 2006, ASTM broke down below key support, which was 1.88-190.  It's "key" support, because when 1.87 got printed, EVERYONE who bought the stock in the prior thirteen months had a loss in the stock, and ALL of them became what we call "overhead supply" at that point.  A "supply" of players who want out at a break even, or who will gladly take a slight gain.

Over the next six weeks, ASTM put in a W-bottom at 1.63, with the middle of the "W" at 1.87.  When 1.88 got printed, a penny above the middle of the "W," it put a target of 2.11 IN PLAY, which got MADE in a single day, on March 23.

From there, ASTM slid back below 1.88 - 1.90 support...temporarily found support at the 1.63 double bottom....then slid all the way to 1.10.  UGH.

With respect to RIG, Friday's rally/re-test of the neckline on news of a contract with one of the Scandinavian countries (sorry, I forget which) could be said to be "the nexus of where the fundamentals meet the technicals."

RIG had no problem gapping up and rallying on the good news (fundamentals), but the rally stopped on Friday exactly at the broken neckline, 71.18 (technical resistance).

From here in RIG, we have a battle of the fundamentals that are supported by the short-term technical breakout that put 73.81-74.10 IN PLAY vs. seven months of "overhead supply."

[Melf Elf]

From here in RIG, we have a battle of the fundamentals that are supported by the short-term technical breakout that put 73.81-74.10 IN PLAY vs. seven months of "overhead supply."

The 73.81 - 74.10 target MADE, and more.  This is looking too strong at the moment, to short it. 

[bjc]

Haven't seen old melf around here in a while.

Man does RIG look attractive.  Enormous growth and textbook technical breakout.  I'm planning to buy some far out of the money calls to expire in July 08.  I think RIG will make a fast and furious run to 200 based on its tremendous fundamentals. 

Trailing PE 16, Forward PE about 11, and 5 year growth rate of 25%.  This just doesn't make any sense to me, the stock price needs to appreciate a lot IMO.

[bjc]

RIG remains bullish.  I think it could get to $200 in the first quarter of 08.  I'm long $200 strike Jan 09 calls. 

Also went long NE LEAPs today, these stocks valuations simply haven't kept up with Earnings growth, IMO only of course.  Take it for what its worth, I think these stocks are cheap as dirt.  RIG wouldn't be expensive if it was $300.  The forward PE would still be about 20.  Time will tell my fellow investors and traders.