On Dec 21 I posted my purchase of shares in SDLP – the drop-down subsidiary of offshore driller Seadrill. The chart below clearly shows I sold at a loss… but did I have the opportunity to take a profit? Sure… it was not a bad profit either, but did I? No. My greed wanted more.
With how oversold SDLP is (not just was), my hope was for the late December price momentum to continue pushing the stock higher but that clearly did not happen over the past couple weeks.
So now what?
I entered the trade at $3.39 / share and got out at $3.10 / share. Oil continues to see weakness. Media coverage saying $20 / barrel is possible. Offshore drilling is a tougher market than ground recovery. Seadrill is extremely heavy on debt. All reasons that didn’t make me feel comfortable taking on the risk holding this longer term with the price momentum wiped away.
As much as I wanted to make $ on this stock, I think the risks began to outweigh the reward. This trade was meant to be a short-term quick $ in and out.
My worry of holding was whether I’d be stuck with a falling knife. The chart below doesn’t lie… since late Nov the sentiment has been NEGATIVE. The stock rode the -2 SD line all the way down until mid Dec. Next stop? Who knows… I think lower prices aren’t out of the cards. Maybe I’ll get back in at some point, or maybe I won’t.
Lots of articles in the media are saying to stay away from Seadrill and rightfully so… I was not comfortable holding this long-term. But I am compelled to try and make $ on an oil rebound. The key seems to be timing because even with how oversold oil is, the rebound is not here yet. It seems tough even just to hold ground.
Lets dream for a minute… if oil returns back to their pre-crash levels of $90 to $120, anyone holding this stock will have it made with 5x their money easily, probably even 10x. Who knows… it’s anyone’s guess. Maybe there’s a dreamer out there, but not me. Not on this stock.
For now, I’m on the sidelines.
Good luck Seadrill (and shareholders). I hope you make it!