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RIG - Transocean Ltd
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RIG - Transocean Ltd

  #1 (permalink)
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RIG - Transocean Ltd

I'm sure few futures.io (formerly BMT)ers follow this stock but it caught my eye yesterday after it catapulted higher. Let's discuss it here if you'd like.

I opened a position trade long yesterday afternoon at the close and added this morning, and my average basis right now is 38.36. I tweeted these trades (twitter: joshtrader) at the time so they can be verified. I have 37.50 puts to hedge so that if I am not clear on it in a day or two, I have at least a few days to try to gain clarity. I really don't want to see it even trade below 38, but I would not close my position immediately if it does, as I'm hedged and have bought some time.

Here's what I see in this stock. First the bigger picture weekly:

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I haven't included pre-2012 but this also shows general support around these prices. Now the daily chart of 2014 with profile:

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Clearly 40-44 has been the area where RIG was most comfortable. Now a monthly profile:

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Now, the fact that RIG is trading below 40 is not a bullish in and of itself--quite the opposite. Yet, note that, on a very long horizon (multi-year as shown before) and on a 2014 horizon, these are the "cheapest" available. That in and of itself says nothing about whether we should buy a stock, however, IMO.

So what makes RIG a good candidate for a buy here? In a nutshell, it was the action yesterday, Tuesday 8/26. After getting slammed down on Friday 8/22 and drifting lower Monday, on Tuesday it traded right back up into the prior week's (and month of August's) most fair prices. Weekly profiles::

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Here's the daily view:

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So on Tuesday RIG established that it was generally happy trading in the 38.40s to 38.70s range, as it had done the prior Wednesday and Thursday. You can see the area from 38.15 to 38.50 that is very thin from Tuesday. I would call this a poorly auctioned area, and in a very healthy way, RIG traded lower premarket and at the open tested the bottom of this range. It then moved higher and tested the upper portion and now is trading above. This is extremely healthy behavior, and will lend more credence to the bull case for others who might look to buy on weakness who are not in right now. This morning I added in the .20s for this reason, that it was perfectly fine to be trading lower, as long as we did not get too far below the 38.10 area, because this area needed to be re-auctioned.

Helping a bull case is that the short interest is 17%, pretty high for a stock like this. In fact, this is about the most compelling reason to be long the stock other than the actual behavior of the stock. On a side note, a large opening sale of 36 Jan puts for RIG was made a few days ago. Interesting, if nothing else.

This is a beat-down stock, trading a multi-year support, which bounced very well on Tuesday on very good volume. The sentiment in offshore drillers has been pretty negative lately, and energy has been lagging. A tailwind could come in the form of the energy sector as a whole, which has broken out of its month-long consolidation and is likely headed for new highs soon:

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I'm choosing not to discuss fundamentals as I'm not an expert, and I truly believe that they are not that important in this case. RIG had earnings recently and they were excellent, but it continued to slump lower. More important, in my belief system and model of how markets work, is how traders are positioned, how they respond to news and events, sentiment shifts, and most importantly, the structure and behavior of the stock. The stock is not the company, nor is it any other company. What matters most, IMO, is the recent behavior of traders in RIG.

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  #3 (permalink)
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Most of time i trade futures. so Always very fast in and out to run away with benifits.

If i would buy a stock then i would buy on a positive divergency. Rig has that.
First target would be 39,73.

For the rest its money management ( important ) and see how the price is developing.

Good luck

Just my 2 cents

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crossover View Post
Most of time i trade futures. so Always very fast in and out to run away with benifits.

If i would buy a stock then i would buy on a positive divergency. Rig has that.
First target would be 39,73.

For the rest its money management ( important ) and see how the price is developing.

Good luck

Just my 2 cents

Thanks for your input @crossover, it's good to see some traditional indicators that others use showing this divergence. My first target is in fact very close to yours, at 39.60, and if RIG trades there I will likely take off 1/4 of the position to pay for my puts.

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I know my TA is not the norm here but I thought I would offer a comment on RIG from the perspective of the way I do TA.

BTW, I concur in your evaluation of the fundamentals....both the debt (steady with a slight lessening/quarter) and Income are stable and no net revenue losses....enough said about that....

I usually start with a P&F chart to establish support and resistance.


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this is an improving chart...the support is strong at $37.50 and an equally strong resistance at $39.00.... the good news is that it has challenged this resistance 3 times in the last 3 weeks and if it breaks the price should have a nice rise...the dotted lines are were I see further resistance ...the first one between $39.75 and $40.00 and then a stronger one at $42.00.

I don't suggest the stock is going to fly to those levels in a day or two , especially between the two dotted targets there should be a lot of minor stops/starts, but those would be my targets if it passed $39.00

Is a movement coming soon?


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This stock has been in consolidation for quite a while. See the circled area in the BBwidth and MACD...I call that a BBWidth/MACD pinch...this happens when the MACD and BBWidth reverse directions during a downturn in price and indicates a bottom to a run. Does it mean no more declines....not at all...it just means the previous fall is over. You can see another example of the pinch on March 20

Looking at the bottom chart you can see that the BBWidth has fallen to a level where major price movements occur...the movement can be pos or neg. What you want to see is what happened on June 12...see how the Slow Sto/MACD and BBWidth go in the same direction....the trigger is the BBWidth movement.

My view of this chart is bearishly neutral....

Why? because the MACD looks fine but usually the Slow Sto leads the way and it is still under 20 and basically flat. So far this suggests to me that this attempt to pass $39.00 might fail. More about that later.


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This is not a bullish chart.

The CMF underlay is bearish but does show promise as it is trying to rise out of the mud. See how the price tends to follow the CMF? I would want to see a more aggressive movement of the CMF to call it really Bullish....I would say this overlay though is mildly bullish

the RSI is neutrally bullish...bullish because it has a rising slope but it is pretty flat so it is neutral

the DI+/- is neutrally bearish...neutral because the red green lines are flat, bearish because the red is above the green


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the ICHI chart is bearish....the share price is below the clouds and drifting under the red one which is worse that the green one. The thin green and red lines are still far apart...though there is encouragement in that the distance is converging. Unless this stock rises very soon that red cloud will be a problem.

The OnBal Volume is mildly bullish with a nice best line pos slope
the CCI is also mildly bullish as it has crawled out of the mud but has just risen over zero

Conclusion

As you can see there are mixed messages in the analysis...what I do is draw a consensus

Bullish.................. 0
mildly Bullish ........ 3
neutrally Bullish..... 1
Neutral................. 0
neutrally Bearish.... 1
mildly Bearish........ 1
Bearsish................ 1

cancelling out opposites I get

mildly Bullish ........ 2
Bearsish................ 1

from this I would judge the current status as neutral...with a tinge of bullishness.

Remember the first chart with the neutral Slow Sto....this says to me that the current rise toward $39.00 will fail to pass the resistance and it will fall back and not pass the resistance...it will fall and regroup to try again IMHO....It is a watch for me I would wait until I saw the BBwidth trigger (sudden rise) before I made the decision to buy in or not.

A long post but this is how I do a complete analysis on a stock....I hope you find it interesting....not trying to convert you...just giving you a different perspective...we shall see how I did

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@Underexposed, thanks so much for your contribution and analysis. One thing to note is that due to the dividend recently, a dividend adjusted chart such as you have, shows a dip to prior lows, whereas one that does not adjust to dividends (such as what I posted) shows a dip below. This does affect the analysis somewhat, though not in a make-or-break kind of way.

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josh View Post
@Underexposed, thanks so much for your contribution and analysis. One thing to note is that due to the dividend recently, a dividend adjusted chart such as you have, shows a dip to prior lows, whereas one that does not adjust to dividends (such as what I posted) shows a dip below. This does affect the analysis somewhat, though not in a make-or-break kind of way.

I don't find that the adjustment for dividends makes much difference to my analysis of a stock. The adjustment is dominoed all down the stock history so pretty much the same conclusions apply.

I see a small pullback happened today and the Slow Sto in my chart is still stuck below 20....Slow Sto generally leads a bullish charge in my opinion so I don't see a challenge outright to the $39 resistance to be successful soon...I think it has a good chance to be successful eventually but not til the Slow Sto rises followed by the sudden rise in the BBwidth in that second chart...then I think the resistance will fall....it would be just a watch for me til it happens.

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Posting an update on RIG before the beginning of the shortened Labor Day week.

Here's the weekly profile view. Rotating inside the green box is productive. Dipping into the red box is okay, but any kind of acceptance there will be a negative, particularly below 38, and at that point, given where we are in proximity to the week (due to my hedge), I will look to either employ a "wait and see," or try to gracefully exit by first closing the puts for a profit, and then either cutting half, or simply dumping it altogether. Getting to the yellow highlighted area would have me taking off 1/4.

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Here we can see the activity over the last 8 days. Using a 60% value area, we can see that the bulk of the volume has been concentrated into a tight 45 cent range, while the entire range is over 150 cents. It doesn't say anything about the future, but it does objectively, without interpretation, tell us that most of the trade has occurred in the 38.30 to 38.80 range. The noteworthy part that was the catalyst for the trade idea is of course that RIG traded below this range, and was bought back up into it.

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So RIG has been bought off the lows aggressively; it has reestablished acceptance and value above 38.30; it has repaired the poorly auctioned area made on Tuesday, and on Friday traded above it, back in the >38.50 acceptance area.

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Being as objective as I can while still having skin in the game, I would describe the action in RIG after the Tuesday ramp up as "healthy." It has auctioned well and has done what it needs to do in order to set up for a move higher. It has shown where it is comfortable (mid 38s) and where it is not comfortable (<38). So in the last couple of weeks we've seen fair prices, and unfair lows, but have yet to really see an auction to determine what is unfairly high. This is my expectation of what is likely to happen soon.

Here is XLE, which I am also long, and which is providing a nice tailwind so far. RIG really needs it and will not likely do well if energy stocks on the whole do not perform well.

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RIG beta vs XLE for YTD

> betaOverTime(symbol="RIG",index="XLE",start="2014-01-01",end="2014-08-29")

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RIG beta vs XLE for YTD

> betaOverTime(symbol="RIG",index="XLE",start="2014-01-01",end="2014-08-29")
Mike

Forgive my ignorance Mike, but what is "betaBear" and "betaBull"? How is XLE beta represented in the chart?

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