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Today’s chart is of Transocean (RIG) provides offshore contract drilling services for oil and gas wells worldwide. It offers deepwater and harsh environment drilling, oil and gas drilling management, and drilling engineering and drilling project management services, as well as logistics services.
Ticker: Transocean (RIG)
What I Am Looking At:
- Since 2008 top, shares have trended to the downside creating a series of lower tops
- Round-number $40 level could act as major support which were low points from 2011 and 2012
- 0 percent year-to-date level $44.66 could act as a magnet
- Shares currently up 5.4 percent YTD, underperforming peers in the energy sector
- Peak call open interest for the September/October series resides at the 48-strike, could pose as a major roadblock for any potential advance in share price
- Short interest bottomed last spring from the lowest level in many years and has since doubled but short positions do not appear to be in trouble as shares have steadily declined
- Nearly 2 percent of the float is sold short, indicating short-covering should not be a cause for concern
- Nearly 6 calls have been purchased for every put during the past 10 days, which is hitting an optimistic extreme among option traders
- Analyst community is also optimistic on RIG as 7 rate the shares a “strong buy” and 2 maintain “buy” ratings, while 11 have “hold” ratings
Conclusion: Looking for shares to eventually test the round-number $40 level which would equate to about a 15 percent further decline from current levels.