Diamond Offshore Drilling Broke Support

Published on Tuesday, 15 May 2012 06:12 Written by TradersHuddle Wire

New York, May 15th (TradersHuddle.com) - Shares of Diamond Offshore Drilling, Inc. (NYSE:DO) closed the trading session at $61.67 below calculated support at $62.79. The stock broke long setups, prompting the bulls to worry that this move might give the bears the upper hand.

Diamond Offshore Drilling, Inc. (NYSE:DO) drills offshore oil and gas wells on a contract basis. The Company is a world-wide deep water driller that serves markets that include the deep water, harsh environment, conventional semisubmersible and jack-up markets.

Diamond's stock was trading in a well defined range with support at $62.79 and resistance at $69.97; given that this range was broken traders will be closely monitoring the stock's price action for clues of direction.

From a technical perspective, it can be expected that previous support becomes resistance, as the new range gets defined. However, $62.79 will remain in focus as Diamond's price action places the stock near the broken support. Traders will be waiting to see if it can bounce back and return to its previous range.

Traders wanting to establish a short position in Diamond Offshore Drilling can do so if the stock breaks the intraday low, or if the stock bounces back and selling materializes again at previous support of $62.79. However, if traders want to build a long position, the best entry point to do so is when the price action takes the stock back to calculated support.