Ease Out of Peaking Oil Drillers

This column was originally published on RealMoney on April 26 at 1:38 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.

Back on Feb. 17, the "Ocean's Seven" gang of oil drillers was poised for a rebound after hitting bottoms not long before. Now it's time to book some profits on the possibility that the oil drillers peaked between April 19 and 25.

Four of the seven oil drillers bottomed on Feb. 15, with the other three going deeper into the ocean floor into March. Now, six of the seven -- Baker Hughes(BHI Quote), Diamond Offshore(DO Quote), GlobalSantaFe(GSF Quote), Halliburton(HAL Quote), Noble(NE Quote) and Transocean(RIG Quote) -- have reached 52-week highs over the past five trading sessions.

In February, I encouraged investors to add to positions on weakness to value levels. (A value level is a price at which my models project that buyers will emerge.) Now, with the energy sector 25.6% overvalued, the oil drillers have become overvalued and are becoming overbought. The only member of the Ocean's Seven that is trading around its fair value is Nabors(NBR Quote). ...