The shares of drilling diva Atwood Oceanics, Inc. (ATW: sentiment, chart, options) continued their journey into the red today, falling nearly 14% to mark a new multi-year low of $12.60. Since peaking near the $63 level in mid-June, the security has backpedaled roughly 80% beneath resistance at its 10-day moving average, with rally attempts capped by its descending 40-day trendline. Furthermore, during the past 60 trading sessions, ATW has underperformed the S&P 500 Index (SPX) by more than 40%.
Today's descent into negative territory, it seems, was brought on by a bout of bearish brokerage action. This morning, Raymond James downgraded the security from "outperform" to "market perform."
However, despite ATW's technical troubles of late, many analysts remain in the bulls' camp. According to Zacks, the equity still harbors an impressive 4 "strong buys" and 1 "buy" rating, compared to 5 "holds" and nary a "sell."
In addition, Thomson Financial reports that the average 12-month price target on the stock stands at $35.42 – a level ATW hasn't closed a session above since late September. In order to attain this generous target, the shares would need to nearly triple from today's new low.
Meanwhile, it seems that analysts aren't the only ones donning rose-colored glasses. The stock's Schaeffer's put/call open interest ratio (SOIR) is currently docked at 0.30, indicating that calls more than triple their bearish counterparts among options slated to expire within 3 months. What's more, this reading ranks in the 15th annual percentile, suggesting that short-term options speculators have been more optimistic toward ATW only 15% of the time during the past year.
In conclusion, should ATW continue to drill for new lows, the lingering bulls could get spooked. An unwinding of optimism – whether via additional downgrades and/or price-target reductions, or a reversal in sentiment in the options pits – could spark a fresh wave of selling pressure on the equity.
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