As of yesterday before market open, Transocean (RIG) was down 16% over 9 consecutive days of red. $97 is a key level of support and I am watching that carefully. Fundamentally, there is no reason for the company to go down. Toby Shute of the Fool.com said it best:
"For the first time in the company's history, the overall fleet earned average dayrates north of $200,000. The 57% rise in rates, coupled with higher capacity utilization, drove contract drilling revenues up 64% over the prior year. Field operating income, which the company defines as sales minus operating and maintenance expense, hurdled 165% higher."
RIG is trading at a PEG ratio of 0.33, with triple digit earnings growth. Oil drilling is a good business, with hight demand. But I wonder if all oil stocks have been played out for the year. I had warned readers to take profits in oil refiners last month, and since then Valero (VLO) is down over 19%, Tesoro (TSO) is down over 18% and Western Refining (WNR) is down over 15%. Perhaps it is time to sell all oil related concerns? I thought the drillers would still work, but the recent declines, albeit the broader market decline could be at faulty, is concerning and I recommend caution here.
-- Faisal Laljee
Full Disclosure: I am long RIG but my position can change anytime without notice.