Back to the short side with this selection. I am looking at RIG as a short. It does not report earnings again until 5 August before the open. RIG looks to me like a broken stock that has recently begun a confirmed downtrend. You'll note the steady uptrend from March to June as RIG consistently held above the middle BB line and the 50-day EMA. RIG even popped its head above the 200-day EMA, however it failed to stay there. That's red flag #1 that the uptrend is in danger. Not enough to justify shorting, but enough to be careful about getting long. Red flag #2 is RIG's failure on its last bounce up from the 50-day EMA to reclaim both the 200-day EMA and the middle BB line. Red flag #3 was RIG's failure to hold its 50-day EMA and collapse to a new low. With this, RIG has now formed a lower high and a lower low. The bulls are no longer in charge of RIG.
We see now RIG is having a rally up towards resistance with declining volume. This is an ideal short setup. I think RIG has some more work to do on the upside. A rally into the low $70's would not surprise me, as there is an unfilled gap-down from earlier in July that tops out around $73.50. I expect that gap to get filled and by then, the middle BB line and 50-day EMA would likely be near. I think the gap, 50-day EMA, and middle BB line will act as resistance, along with the 200-day EMA a few dollars higher.
I will be looking to put on a starter short position in RIG as it rallies up towards those resistance levels. I will be looking to add to that short either once the stock drifts up even higher (should it get that far) or once it breaks the multi-day uptrend it has going right now.
Position: none
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