Trade-Ideas LLC identified Diamond Offshore Drilling ( DO) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Diamond Offshore Drilling as such a stock due to the following factors:

  • DO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $70.2 million.
  • DO has traded 1.9 million shares today.
  • DO is trading at 1.68 times the normal volume for the stock at this time of day.
  • DO crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on DO:

Diamond Offshore Drilling, Inc. provides contract drilling services to the energy industry worldwide. It provides services in floater market, including ultra-deepwater, deepwater, and mid-water. The stock currently has a dividend yield of 3%. Currently there is 1 analyst that rates Diamond Offshore Drilling a buy, 5 analysts rate it a sell, and 10 rate it a hold.

The average volume for Diamond Offshore Drilling has been 2.8 million shares per day over the past 30 days. has a market cap of $3.2 billion and is part of the basic materials sector and energy industry. The stock has a beta of 0.98 and a short float of 28.6% with 5.63 days to cover. Shares are up 3.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Diamond Offshore Drilling as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 348.3% when compared to the same quarter one year ago, falling from $98.84 million to -$245.38 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 on the basis of return on equity, DIAMOND OFFSHRE DRILLING INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has decreased to $269.75 million or 12.98% when compared to the same quarter last year. Despite a decrease in cash flow DIAMOND OFFSHRE DRILLING INC is still fairing well by exceeding its industry average cash flow growth rate of -42.02%.
  • The share price of DIAMOND OFFSHRE DRILLING INC has not done very well: it is down 10.15% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • DIAMOND OFFSHRE DRILLING INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, DIAMOND OFFSHRE DRILLING INC swung to a loss, reporting -$2.00 versus $2.80 in the prior year. This year, the market expects an improvement in earnings ($0.90 versus -$2.00).

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