Diamond Offshore Drilling versus industry ETF

Diamond Offshore Drilling (DO), an offshore contract driller, is one of the most well-known US oilfield equipment and services (or OFS) providers in the United States. Its share trended downward in the stock market in 2015. On December 29, 2015, DO was trading at $21.13. This was a 43% fall from its price at the beginning of 2015.

Diamond Offshore Drilling’s Share Price Has Shown Weakness

The VanEck Vectors Oil Services ETF (OIH), which tracks an index of 25 OFS companies, fell 26% during the same period. Weatherford International (WFT), DO’s larger market cap peer, fell 22% since January 2, 2015.

Compared to DO’s $2.9 billion market capitalization, WFT’s market capitalization is $6.7 billion. DO forms 1.7% of OIH. The entire OFS industry has been negatively affected by the energy price crash from June 2014 onward.

What does DO’s share price movement tell us?

DO’s share price was at its fiscal 2015 high of $37.23 right at the beginning of the year. On February 9, 2015, DO chose not to declare a special dividend, although it continued to pay a regular quarterly dividend of $0.13 per share.

DO’s share price continued to trend downward as its financial performance deteriorated quarter-over-quarter until fiscal 3Q15. However, in fiscal 3Q15, DO’s operating income and net earnings showed improvement over fiscal 2Q15. From its YTD (year-to-date) low on October 1, 2015, DO’s share price recovered 26% until December 29.

DO’s moving averages

On December 29, Diamond Offshore Drilling’s share price was at a 1.6% discount to its 50-day moving average. It was trading 14.6% below its 200-day moving average. Moving averages exhibit a smoother trend following a stock’s price movement. A 50-day moving average is a short-term moving average, while a 200-day moving average shows a long-term trend.

DO’s short-term moving average was consistently below its long-term moving average throughout the year. This indicates the bearishness in DO’s share price. DO’s share price, however, crossed over its short-term moving average a few times in fiscal 2015. It’s currently very close to its short-term moving average.

DO’s stock currently faces its 50-day moving average at $21.5 as a short-term upside resistance. Its 200-day moving average is currently at $24.7.

Next, we’ll discuss what DO’s management thinks about its outlook.

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