Friday, January 18, 2008


I bought Rig a while ago and have now come to regret it.

Transocean, Inc. operates as an offshore drilling contractor and a provider of drilling management services worldwide. It contracts drilling rigs, related equipment, and work crews primarily on dayrate basis to drill oil and gas wells with a focus on deepwater and harsh environment drilling services.

So they operate in what is supposed to be the most profitable area of drilling, deepwater drilling. Almost everyone loves this stock, including Cramer. They recently merged with GSF, GlobalSantaFe, which was also a contract driller, giving them bigger stake in the drilling area.

Now lets look at my action and see where I went wrong.

I bought RIG thinking that the selling was overdone and we would reach support very soon at the trendline or at the previous highs of 140. However on the 15th it all came down. That SHOULD have been my signal to sell and possibly go short. Ever since then it has broken the 100 DMA and is approaching the 200 DMA.

My Mistakes:
1. Buying the stock BEFORE the trend was tested.
2. Buying the stock in a weak market, hoping for a bounce.

Now the decision is, what to do with the stock?

Despite all the bad, RIG is still a great company. They report earnings on February 20, when they are expected to earn 2.55. Oil is still high, and exploration should still be growing. The stock managed to make it above its 200 DMA once again today despite overall market weakness. If the market manages to have a recovery soon, I will be able to unload half my position so as to minimize my overall long position in the market.

Next post will be about another oil company MDR.