Traders Should Short a Sinking Transocean

by Sam Collins | June 20, 2012 1:09 am

Transocean Ltd. (NYSE:RIG[1]) — On May 8, when the stock was trading around $48.50, the Trade of the Day[2] identified a breakdown in its chart and recommended selling with a downside target of $38 to $40. 

On June 5, RIG hit our target with a low of $39.32, reversed, and recovered back to the bearish resistance line within a channel down. Then the stock flashed a bearish “death cross” in mid-May, had declining volume on the recent rally, and momentum is now overbought. 

Sell RIG short at $45 or higher. The downside target is $39 to $39.50. As with all short sales, check with your broker for special margin requirements. Short-selling by its nature is a speculative technique. A buy stop order should be entered at $48 to protect against potentially unlimited losses.

Trade of the Day – Transocean Ltd. (NYSE:RIG)
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Trade of the Day Chart Key

  1. RIG:
  2. Trade of the Day:

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