Patterns are rarely "textbook," so students of technical analysis need to think outside the box to get the sense of a bottom instead of using a checklist to tick off. Bottoms are reversal patterns, so first you need something to reverse. RIG qualifies, as it has declined from over $80 a share at the beginning of 2011.
As prices move sideways to lower in a bottom pattern, you like to see volume start to increase on the rallies and diminish on the declines -- the opposite of what transpired in the downtrend. RIG is seeing this volume shift.
Another clue to be looking for is for RIG not to decline on what appears to be bearish news. Not declining on bearish news should tell you that all the bad news has been discounted.
The two dips in January and March of this year could be considered two left shoulders of this bottom.
The decline last month to a new low for the move down could be considered a "head." Because these patterns often display symmetry in their development, it may take another seven months for the right side of this bottom to play out.
Patience should pay off when RIG emerges from the base and starts a new up leg. Look for volume to be heavier than average when this occurs.
Separately, TheStreet Ratings team rates TRANSOCEAN LTD as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate TRANSOCEAN LTD (RIG) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. "
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Energy Equipment & Services industry. The net income has significantly decreased by 41.7% when compared to the same quarter one year ago, falling from $587.00 million to $342.00 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, TRANSOCEAN LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 60.22%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 42.94% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- TRANSOCEAN LTD's earnings per share declined by 42.9% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TRANSOCEAN LTD swung to a loss, reporting -$5.25 versus $3.85 in the prior year. This year, the market expects an improvement in earnings ($3.41 versus -$5.25).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 22.4%. Since the same quarter one year prior, revenues fell by 19.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: RIG