Trade of the Day: Diamond Offshore Drilling Inc (NYSE:DO)

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Today, we’re recommending a bearish trade on Diamond Offshore Drilling Inc (NYSE:DO). DO has been a laggard in the energy sector during 2016 as oil has bounced higher, and now that oil prices are dropping once again, we expect DO to accelerate its move to the downside.

DO is scheduled to release its quarterly earnings on Monday, Aug. 1, before the market opens. With Tuesday’s confirmed break below support at ~$23, we expect the stock to drop back down toward support between $20 and $21 — the price range the stock bounced up off of in early April — in the run up to, and aftermath of, this announcement.

DO is in a precarious position in the oil industry because of the high costs associated with offshore drilling. When oil prices are high, these high costs are easily offset. But when oil prices are low, offshore drillers are some of the first to see their margins get squeezed. We expect a disappointing outlook from DO as it reports its numbers next Monday.

‘Buy to open’ the DO September 20 Puts (DO160916P00020000) for a maximum price of $0.80.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/07/trade-day-diamond-offshore-drilling-inc-nyse-do/.

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