Transocean RIG: The stage is set for a short squeeze

Introduction

Transocean Ltd. (NYSE: RIG), a leading offshore drilling contractor, has witnessed a notable surge in its stock price over the past two years. With shares climbing from a low of 67 cents to over $8, investors have taken notice of the company’s positive momentum. Combined with a high short interest, rising oil prices, and a robust recovery in oil demand following the COVID-19 pandemic, Transocean RIG appears to have the potential for a significant short squeeze.

Stock Price Surge and Short Interest

Transocean RIG has experienced a remarkable upward trajectory in its stock price, reflecting a substantial recovery over the past two years. From a low of 67 cents, the stock has climbed to over $8, indicating a nearly twelvefold increase. This impressive growth has captured the attention of investors, who have increasingly viewed Transocean RIG as an attractive investment opportunity.

Interestingly, despite the substantial price appreciation, the short interest in Transocean RIG has not significantly declined. According to Yahoo Finance, the current short interest stands at approximately 20% of the float. This means that a significant number of investors have bet against the stock, expecting its price to decline. However, this persistent short interest, combined with the company’s positive momentum, sets the stage for a potential short squeeze.

Rising Oil Prices and the Commodities Supercycle

Another crucial factor bolstering the potential for a short squeeze on Transocean RIG is the sustained increase in oil prices. Over the past few months, oil prices have been on an upward trajectory, driven by multiple factors, including increased global demand, supply constraints, and geopolitical tensions.

Moreover, the global economy finds itself in the midst of a commodities supercycle, which refers to an extended period of elevated demand and rising prices across various commodities. As a key player in the offshore drilling sector, Transocean RIG stands to benefit from this favorable market environment. The company’s revenue and profitability are closely tied to the health of the oil and gas industry, making it an attractive prospect for investors seeking exposure to rising commodity prices.

Oil Demand Recovery Post-COVID

The recovery in oil demand following the COVID-19 pandemic has gained considerable momentum, providing an additional tailwind for Transocean RIG. As countries worldwide gradually reopen their economies, travel resumes, and industrial activities rebound, the demand for oil has reached full strength. This robust recovery bodes well for Transocean RIG’s business prospects, as increased oil consumption leads to higher offshore drilling activity.

Older articles

I did talk about a potential of a short squeeze on RIG’s share back in Feb of 2021. The stock price stood around $3.30 at that time. You can view the article using the link below.

RIG – A potential short squeeze candidate?

Conclusion

The convergence of several factors, including the impressive stock price surge, a high short interest, rising oil prices, and a strong recovery in oil demand, suggests the potential for a short squeeze on Transocean RIG. While the short interest persists, the positive momentum of the company’s stock may entice short sellers to cover their positions, resulting in a surge in buying activity.

As always, investors should exercise caution and conduct thorough research before making any investment decisions. Short squeezes can be volatile and unpredictable, with risks of significant price fluctuations in both directions. However, given the favorable market conditions surrounding Transocean RIG, it is worth keeping a close eye on the stock as it navigates the potential for a short squeeze.

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Disclaimer:

I do own shares of Transocean RIG.