Seadrill Ltd (NYSE:SDRL) ended its fourth consecutive positive session with a gain of 0.76%. The stock has just been upgraded by Zephirin Group’s Longdley Zephirin, with an expectation of generating $532.4 million of free cash flow this year and the price objective is raised to $24 from the previous $22 levels. Most other investors differ with this speculation and many think the stock may be a value trap.
Technically, Seadrill Ltd (NYSE:SDRL) is one of the most volatile stocks from the long term perspective. The stock trades at $8.50 levels in January 2006 and appreciated to $35 levels by 2008. The next bear market saw the stock losing all the gains made over the years and register a new lifetime low at $5.90. In the following bull market, the stock recovered everything but the gradually decreasing bullish momentum was clear. The price was forming the Rising Wedge pattern on the monthly charts, a pattern that suggests loss of inner strength despite higher highs.
Seadrill Ltd (NYSE:SDRL) registered its lifetime high at $48.09 in September 2013, followed by a break below the long term support trendline around $40 and triggered the bearish pattern. In March 2015, the stock hit a low of $8.58. The worst may not be over yet as the chart suggests that any bounce may face supply pressure from the resistance zone around $15 levels. There are two very important unfilled gaps on the daily charts, the first one between $15 and $16 and the second one between $12 and $20 levels. These two gaps will be used by the bears to push the price down whenever the corrective bounce reaches that level. Then there is the upper boundary of the long term downtrend channel, containing the entire decline, which may be expected to act as another stiff resistance.