Monday, May 9, 2011

Transocean LTD (NYSE: RIG) Q3 2011 Price Target

Recent price: 67.69$
P/E Ratio: 52.44
3 Months Target Price: 83$

Company Description
Data provided by Reuters tells us that Transocean Ltd. is an international provider of offshore contract drilling services for oil and gas wells. The Company operates in two segments: contract drilling services and other operations. Contract drilling services, the Company’s primary business, includes contracting Transocean’s mobile offshore drilling fleet, related equipment and work crews primarily on a day rate basis to drill oil and gas wells. Its other operations segment includes drilling management services, and oil and gas properties. It participates in oil and gas exploration and production activities.

Confidence Margins
Strong resistance $85.98 (+27%)
Light resistance $83.05 (+23%)
Light support $67.41 (-1%)
Strong support $62.47 (-8%)

Shares of Transocean LTD has been on a downtrend since they issued their annual results, which proved to be disappointing. Since then, investors surrendered their shares and provided us with the opportunity to get en early position when the oil services sector picks up.

Entry strategy
For the cautious investor:
Buy the stock for 69$ or less.

For the risk-taking trader:
The November 2011 70$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 540$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 83$, or keep it until 85$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 83$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

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