Transocean (RIG) stock price technical analysis: the plot thickens

Transocean (NYSE: RIG) stock price has been in trouble as I predicted in October. It was trading at $5.70 on Thursday, down by over 35% from its highest point in 2023. This pullback has brought the company’s market cap to $4.6 billion while its short interest has remained steady at 18.6%. 

Transocean’s fundamentals are relatively strong. It ended last quarter with over $9.6 billion in order backlog, a record figure that is also 2x that of its nearest competitor. It has continued to add to this backlog after winning a $486 million project in Brazil. It also won a $251 million harsh environment semisubmersible contract.

In addition, the company is working to fix its mountain of debt. In the past three quarters, Transocean has reduced its long-term debt from $7.3 billion to $7.06 billion. It also improving its free cash flow while the management expects that profitability will start to improve this year.

The goal of this article is not to delve into Transocean’s fundamentals. Instead, I aim to do a technical analysis, which will help to predict the next price action of the RIG share price.

Transocean stock price forecast

RIG chart by TradingView

On the daily chart, we see that the RIG share price formed a double-top pattern at $8.88 between July and September last year. The neckline of this pattern was at $7.58, the lowest swing in August. In price action analysis, this pattern is one of the most bearish signs, which explains why the stock nosedived. 

Worse, RIG has formed a death cross pattern, which happens when the 200-day and 50-day Exponential Moving Averages (EMA) make a bearish crossover. Again, like the double-top pattern, this one is also one of the most bearish signs in the market.

Transocean shares have also dropped below the 61.8% Fibonacci Retracement and are nearing the 50% point. Additionally, the stock is nearing the key support at $5.5, the lowest swing in December. It is also approaching the key support at $5.44 (May 2023 low).

Therefore, the technical picture for Transocean is not looking good for now. In this case, I will be watching a break below the two supports at $5.5 and $5.44. If this happens, it will mean that bears have prevailed, pointing to more downside. This will open the possibility that the stock will drop below the psychological point at $5.0.

On the positive side, failure to break below $5.55 will validate the small double-top pattern that has formed and point to more upside to the neckline at $6.80.