Is Transocean Ltd. (NYSE:RIG) a 'slick investment' or an 'oil slick'? I must admit, I have been struggling with this question for some time. But after a lot of soul searching, I'm declaring the stock a slick investment for a number of reasons that I will get into shortly.
This is a difficult article for me to write, because RIG is one of those companies that amplifies the psychology of trading. My emotions tell me to play the trend and short, short, short, ... But my brain is telling me the opposite, to 'stick with the game plan'. When I wrote my March article on RIG, I stated 'Investors should avoid RIG until the stock price drops below $12'. My thought was to get in at a lower price. Well, RIG has been below $12 for some time now and it is now time to put on the blinders and go for it. Investments always come with risks, the bigger the risk, the bigger the payoff. So going long on RIG should result in a pretty good payoff, right?
RIG reached an intraday high of $16.16 back on Jan 12, 2017. Since then the stock price has been falling in a steep descending channel with a (hopefully) final exhaustion breakdown of $10.03 on May 4, 2017, before recovering to a recent $11.17.
OK, if you are a Fibonacci lover, then you will recognize this key ratio: $10.03 / $16.16 = 0.62. This is almost bang-on the golden ratio of 0.618, where resistance should be expected and marks a possible turning point.