Cup and Handle Pattern on This Drilling Stock Shows Opportunity

11/03/2009 12:01 am EST

Focus: STOCKS

Diamond Offshore Drilling (DO) -- This worldwide offshore oil and gas drilling contractor has formed a massive bottom known as a cup and handle, which is a very bullish formation. The cup-and-handle bottom, coupled with a golden cross, which is also bullish, makes this chart look like a winner.



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On September 22, I said, "In order for DO to make the final breakout, it must follow through on the penetration of the triple top at $94.50. The current round of profit taking gives us an excellent opportunity to buy DO, because the rebound should take it to at least $110."

DO broke the triple top and ran to just under $110 early in October. But profit taking has again driven the stock down to our buy point under $95.

DO pays a dividend of $8 per share, giving it a dividend yield of 8.59%. 

By Sam Collins of OptionsZone.com

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