NEW YORK (TheStreet) -- Diamond Offshore (DO) - Get Diamond Offshore Drilling, Inc. Report is surging on Friday. Shares are up over 6.5% and are trading at new August highs.

This is an impressive reversal from the extremely negative way the stock began this week. On Monday's open, Diamond Offshore was at new 52-week lows and was undergoing its fourth straight day of heavy distribution. Since then the stock has gained more than 20% as investors aggressively bid up the stock. By today's settle, it will record its fourth straight session of well-above-average upside trade.

Diamond Offshore began a steep selloff in early May. By late July the stock had fallen more than 40% before showing signs of a bottom. Diamond Offshore remained in a tight, high-volume range over the next four weeks as bulls and bears battled it out. Last week it appeared the bears had gained the upper hand as selling pressure surged, but the losses were limited.

Diamond Offshore held in well near key support at its July low, even after the ugly downside on Monday morning. As shares continued to attract buyers since Monday, a significant bottom now appears to be in place.

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The bullish action today has set up Diamond Offshore well for more upside. A rather high short interest ratio of 6.5 will add extra power to the move. The stock now has a solid layer of support near last week's high of $22.85. Diamond Offshore still has layers of resistance to work through, but a rebound move back up to the 2014 low of $29 appears likely.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.