RIG: At a crossroads, time to decide

Updated

RIG recently broke out of its bull flag. However, since then oil prices have fallen sharply, creating selling pressure for RIG. RIG successfully defended the breakout yesterday when oil prices were down 4%, but RIG has another test ahead of it today as oil has fallen another 3%. In my opinion, the downside risk from here is minimal, but the upside is tremendous, creating a highly favorable r/r setup. If RIG is unable to defend the breakout today, I expect the stock will retest the lower trendline around $5.30, which I expect will provide strong support. However, if RIG is able to maintain the breakout even after oil falls 7% in 2 days, that would be a tremendous show of strength. I think it could go either way right now, 50/50, but I think the bullish interpretation is the highest probability at this time. It is possible that this stock could reach 20/share over the next 6-12 months.

Note

RIG failed to hold the breakout and is showing relative weakness today. I expect now the stock will test the bottom trendline for support, which I suspect will likely hold. Building a nice base for the next leg up.

Note

Price has now returned above the trendline. A fake breakdown like the one we've just seen generally precedes a sharp move upward, so this may very well be the beginning of the next leg up. Not a lot of volume behind this move and RIG is highly volatile, so be careful. Will need to see price break above the local peak of $6.54 to confirm the new uptrend.

Note

RIG closed above the local peak of $6.54, so we can say with a high degree of confidence that the uptrends has been resumed. Will be interesting to see what comes of the OPEC meeting over the weekend. A large announced production cut could cause crude prices to spike, which would bode wonderfully for RIG.

TomDaSpankEngine

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