Transocean LTD (NYSE:RIG) has come under fire in the last few weeks as various houses downgraded it not only from “buy” to “hold” but to even “sell”, as Deutsche Bank did in the last week of February. An overview of the broking houses shows eleven recommendations to sell along with nine to sell against only three recommendations to buy the stock.
Transocean LTD (NYSE:RIG) suffered from this poor perception yesterday too, when it lost over 6%. The volume rose to 16.7 million against the average volume of 12.5 million, implying the bearish strength. The bearish volume has sustained a higher level for the last 3 months as the bears keep distributing.
Technically, Transocean LTD (NYSE:RIG) shows the reasons for downgrading all too clearly. The stock has been in a huge bear market for the last 5 years and shows no sign to reverse it. On the contrary, the sideways phase of the last few weeks has been resolved on the downside and shows all indications on making new lows, far lower than that can be generally expected right now.
Just a single glance at the larger time frame suffices to show the similarities, though much larger, sideways range in the period of 2012-2014, that eventually resolved on the downside in a very similar manner. The resultant fall produced a one-way move from $40 to $14. The current breakdown may show the same kind of price action.
The width of the last range was $6 roughly, which gives us a technical target of $8 in the coming few weeks. The distribution pattern, as discussed above, prevents from any attempt to catch the bottom. Prudent investors would like to wait and keep away from a stock like this, which remains in its own bear market when the broader market is enjoying one of the biggest bull markets.