The Student Loan Ranger

Well we've got over a foot of snow here today I reckon, and my much anticipated return to college has been put off for another day. I am so bored it's unreal. No college, all mates at work, no trading, crap weather, gym closed, nothing on TV, watched all my DVDs and I've read all my books. The Mens Health I just bought distracted me for all of an hour.

And here is some analysis on an interesting looking stock, RIG.

Yes the World is in recession and the price of oil has slumped dramatically in the past few months. However, in a market that shows consecutive bear signals on nearly every chart, RIG has 3 very bullish signals interlinked with each other over the past 4 months.

First off is a the beat down, which became a falling wedge. These wedges are bullish and often lead to a substantial rally (I see these all the time on 15mins). It is also a reversal pattern. Another reversal pattern is the inverse head and shoulders, the top of which forms the most recent low in RIG at $41.95. A reversal pattern in a bear market, followed by what could turn out to be a continuation pattern in the form of an ascending triangle.

There are a few key prices to watch here, most notably the $57-$58 mark, which is serving as overhead resistance for the ascending triangle. Also, $50 in the shorter term acting as support. The next low would ideally be above $48. Any breakout of $58 on a re-test would be a good long signal, proving it also breaks above and is then supported by the 50EMA which is currently pinning RIG down.

I would like to see this consolidation over the past few days get tighter and then I'll watch for some volume coming in.

Measured moves:

Wedge ~ $83
Triangle ~ $72
IH&S ~$75
200EMA currently at $71.2

I will watch these levels if RIG breaks out.

However, given that this is a market in which many TA patterns simply fail, it is wise to exercise caution here. The price of oil is certainly a lot more stable at the moment, but that is reducing the underlying profits of companies like RIG. The likes of Noble have fallen to prices where the outlying stock is worth less than the actual company for example, and there's no reason why this can't happen to other companies.

Anyway, with good risk measurement in place, I think RIG is a great long on the breakout with stops around $54.

Things to look out for (break signals and entry points):

1. Moves up off the 20EMA consolidation for a bull flag type setup
2. Clear break above $58
3. Volume on the break
4. Strong bullish candlesticks
5. A pullback on declining volume to $58 or the 50EMA for entry
6. Initial targets around $70-$75
7. Continuation patterns forming after potential run to $70
   
8. $85+ targets medium - long term

Post-script edit:
I just realised I'm a month away from my 1 year anniversary as a blogger and market follower. To celebrate this momentous occasion I'm going to feature the most ridiculous things I ever said about the stock market in a series of quotes and chart montages, and a few lessons I've learned along the way. The third paragraph of my first post is possibly the most dumbest naive thing I think I have ever read! I have come a long long way since then.

Edit for later:
OK well I had nothing else on so I wrote an article type post about my year in trading so far. Obviously I can't comment on the coming month, so I will be releasing my chronicles in part issues every Sunday until the 1 year birthday at the start of March.

There are 8 sections (2 a week) and one bonus section (special anniversary pulloutl) that serve as a history of my trading. From the most ridiculous statement I ever made about trading, to my series of broker-blowups - all tales are featured in this candid tell-all biography of The Student Loan Ranger! Loan Ranger... Hoooooooohh! (to Thundercats intro voice).