Trade of the Day: ATW Stock Ready to Stage a Big Turnaround?

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Atwood Oceanics, Inc. (ATW) — Shares of ATW stock fell nearly 3% in after-hours trading Thursday after the offshore drilling contractor announced it had eliminated it quarterly dividend. Management cited challenging market conditions, saying this move will help it preserve liquidity, strengthen the balance sheet and provide greater flexibility to weather the current downturn.

On Feb. 2, Atwood Oceanics reported better-than-expected fiscal first-quarter results of $1.32 per share, handily beating the consensus estimate of $1.12 per share.

Following the earnings announcement, S&P Capital IQ Equity Research cut its 2016 and 2017 EPS estimates and lowered its 12-month price target for ATW stock by $13 to $12. However, its analysts maintained their “Buy” rating on shares.

They note that ATW stock is a high-risk play given the volatility in oil and gas prices, capital spending cuts by its customers and market conditions in Southeast Asia. But they say this should be offset by the company’s focus on mid- and deep-water drilling.

When oil prices bottoms, this is the type of stock that could provide outsized gains quickly.

Due to the steady decline in the price of crude, ATW stock fell from a multiyear high above $59 in August 2013 to a recent low of $4.82. However, a turnaround appears to be in progress.

Several weeks ago, ATW stock flashed twin buy signals from my proprietary indicator, the Collins-Bollinger Reversal (CBR), at $5.43 to $4.82. Both were on significantly higher volume and were followed by an upside break of the bearish resistance line from a deep “V” bottom.

The next target for ATW stock is its 50-day moving average at $8.60, and then the resistance line at $10. Buy shares under $6 for a potential 43% to 67% gain. This is a high-risk recommendation, so a stop-loss order should be entered at $5.

ATW Stock Chart
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Article printed from InvestorPlace Media, https://investorplace.com/2016/02/atwood-oceanics-inc-atw-stock-trade-day/.

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