Tuesday, 29 April 2014

DO, RIG, SDRL - drilling upward

With the main market continuing to climb up and away from the Monday low, the Oil/Gas drillers saw some notable gains. Diamond Offshore (DO), Transocean (RIG), and Seadrill (SDRL) closed higher by 0.5%, 0.4%, and 1.5% respectively. Near term outlook is very bullish.

DO, weekly

RIG, weekly

SDRL, weekly


*rather than focus on the daily charts, I wanted to highlight an even broader perspective.

The drillers have had a tough time since late 2013. We've seen five months or so of pretty strong declines, but that down trend was decisively broken last week.

This week began weak, but then the broader market was a little shaky. Even during the Monday afternoon sell down in the market, the underlying strength was there to be seen in stocks like DO and SDRL.

Outlook is bullish for rest of this week.

First upside targets...

DO - 56
RIG - 45
SDRL - 37

Those seem reasonable within the next 3-8 trading days. However, if the main market does see a major rollover this summer, the recent lows will eventually be taken out.

*I am long all three of the above stocks, but will be seeking an exit into the Friday close - not least since the positions are via option call blocks, and I prefer to have no positions across a weekend.