Oil Services Remain Weak

Add RIG Puts Now

By Bryan Bottarelli
Thursday, July 20, 2006 3:32 PM EST
Thu, 20 Jul 2006 20:32:00 GMT

Dear Bottarelli Research Member,

Earlier this week, we used weakness in the oil service sector to make fast gains trading the Oil Services HOLDRs (OIH). Unlike pure oil stock plays, the offshore oil and gas drillers have posted lackluster gains so far this year. For example, despite a 55% average gain in 2005, the same collection of stocks has only managed a 6.5% gain thus far in 2006 despite record oil prices and swelling order backlogs. This underperformance is now making Wall Street question the valuations they’ve assigned to these companies — which has resulted in bearish chart formations across the board.

Of course, longer-term bullishness on anything oil-related is a strong position. But right now, this sector is being controlled by the bears. That’s why I’d like to enter a new short-term trading position in Transocean (RIG – NYSE).

RIG

Transocean provides offshore drilling services for oil and gas wells — specializing in deepwater and harsh environment drilling. Although they own and 89 mobile offshore and barge drilling units, the chart indicates the stock could re-test its mid-June low of $70.75. That’s a $2.73 down-move from current levels. Based on this seemingly inevitable re-test, let’s enter some shorter-term RIG puts.

PLAY: Buy the RIG August 75 Puts (RIG TO) at or under $4.30, good for the day. Current bid/ask spread is $4.00 to $4.30. Place a protective stop loss at $2.90.

Lock and load,

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From July 2006