Contrarian traders take note: The huge wipeout in offshore drilling companies has exhausted itself.
For a picture of this exhaustion, we look at the past 12 months of trading in offshore driller Diamond Offshore (DO). Diamond Offshore is one of the world's leading drilling contractors. The legendary Tisch family investment dynasty owns a huge portion of the company. Its rigs can command rates of over $500,000 per day.
To the right side of the chart, you'll see the "Deepwater Horizon effect" on Diamond's shares. The Gulf of Mexico drilling disaster and worries over lost earnings caused incredible declines throughout the drilling sector… including Diamond, which lost 35%.
Now note how Diamond shares have dug a "toehold" in the $60-per-share range and staged a modest rally. Also note that the stock trades for less than eight times earnings… and note that on Friday, Diamond became the first company to send a drill ship out of the Gulf of Mexico in response to the drilling ban. It will soon be at work off the coast of Africa.
Traders… you have your unloved, beaten-down sector… you have value… and you have your "toehold" at $60 per share to trade from the long
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