Breakout and pull back...As expected with the strong momentum of oil RIG pushed out of the the consolidation period and broke out. it reached a high of 4.31, and pulled back to the new support level of 3.71, which was previously the resistance level. This is a perfect breakout, and pull back before it takes off. RIght now it presents a great buying opportunity.
Dangers and cons:
The first major con i would say is in relation to the price of oil. Previously RIG had reached a high of 4.9, when the price of oil was at a high of 64, but when OIL hit a high of 67 this month RIG wasnt at a higher price than when the price of oil was lower. This is a big set back in my opinion.
The second danger I see is that the price of oil has pulled back significantly. The price of oil currently lies on support, and appears to have fallen out of the bullish ascending channel. The past few weeks OIL tried to break past the 67 price resistance, but no success. There is strong selling pressure at that level. If the price of oil doesnt recover back soon it could present a really dangerous downside for rig.
The last and major danger to the whole energy sector is the Iran deal. There is significant progress being made in the IRAN deal, although there is barriers that they need to overcome. In the event that the IRAN deal is struck I recommend getting out of all energy companies. The Iran deal is an extremely bearish catalyst, as could be seen in 2014 when the IRAN deal was struck, which led to a massive glut in oil that lasted well over 3 years.
Pros:
The set up is extremely bullish, and inventories where better than expected this week. The Pros are not as big as the cons, but could be a profitable position if the right cards are dealt. RIG moves in big steps, as oppose to steady rises. If no position is held I say the current price presents an attractice price. The second best price is buying above the 4.35, and hopefully catching the next big breakout.
