Wednesday, 4 June 2014

DO - diamonds... scratched

With Statoll cancelling a contract, Diamond Offshore (DO) was knocked significantly lower, settling -3.7% @ $47.74 - the biggest fall since early April. Near term outlook is shaky, especially with today's daily close under the 50 day MA. Next support is the 46/45 zone.

DO, daily

DO, weekly


For the statoil story..see Barrons

So.. Diamond has lost a contract, but still, today's decline is probably overplaying the loss of one contract. Indeed, other notable drillers - SDRL and RIG, held up relatively fine. The industry as a whole is doing reasonably okay.

From a pure price perspective, DO looks set for further downside to 46/45. What will be critical is the March low of $42.97. If that fails..whether this month..or later in the summer, it will be a very bearish sign for both DO..and the other drilling stocks.

A break of the $40 threshold would bode for $30/25 later this year, at which point I'd be looking to pick up DO, RIG, and SDRL.