Precision Drilling Corporation (PDS:NYSE)
Price at Preparation: $73.38 (Apr 29th, 2024)
What they do
Precision Drilling Corp. (PDS:NYSE) engages in the provision of onshore drilling, completion and production services to the oil and natural gas industry. It operates through the following business segments: Contract Drilling Services and Completion and Production Services. The Contract Drilling Services segment includes rig and directional drilling, procurement and distribution of oilfield supplies, and the manufacture, sale, and repair of drilling equipment. The Completion and Production Services segment includes service rigs, oilfield equipment rental, and camp and catering services.
This week at Theta Bandits, we are bringing a pick to attack the oil and natural gas sector in a different way than we have in the past – let’s check it out!
Opinion
Looking at the past ideas in this series, we have given our thoughts on both Baytex Energy (BTE) and Exxon Mobil (XOM), which are both in positive territory at +19% and +10% respectively. Precision Drilling (PDS) is one up the supply chain in terms of they supply equipment to the oilfield as well as drilling services. With this model they can service multiple companies. PDS recently reported and narrowly missed their estimates however, we can still see in the graphic below that analysts still hold a “strong buy” rating on the stock with 12-month Price Targets (PT) from a low of $81.27 USD (+10.75%) to a high of $99.55 USD (+35.66%), with an average PT of $91.50 USD (24.69%).
This stock does not offer dividends, so we are expecting price appreciation only from this stock. Keeping that in mind, this stock may be more volatile than those offering the stability of a dividend, hopefully this is a volatility that we can take advantage of. As with any stock, the market is never a sure thing and one needs to adjust the strategy to fit your own personal risk profile.
Plan
Using the visual aid graph below, we show the 12-month PT’s (low, avg & high) in green, the 52-week high in blue and the 52-week low in red, with the target range using a resistance level between the low and average PT’s. This is the target range because looking the left on the graph, this was a high point from the previous year. From the current price that highlighted range is three support/resistance lines up, with each resistance providing a good point to secure profit at $77.21 USD, $81.27 USD, $86.55 USD with the final price target of $91.50 USD. At this point the idea will have served it’s purpose, it would be prudent to only hold profit past this point as it is pushing limits to the upper edge, but we want to protect capital as much as we can and let the profits do the heavy lifting.
On the downside, it is still good practice to use the support/resistance lines. Since the current price is at a resistance line, some volatility is expected. Make sure to give the trade the time it needs to work and up to your personal risk profile to decide where to cut the trade and move on the next idea. Looking at this level and looking left on the graph, breaking the support level past $65.03 would put me on alert to keep this on watch and take action to protect the capital deployed.
For more content consider our Theta Bandits Discord community, a hub for traders to ask questions, share ideas and strategies like the approach above for various other tickers daily. Traders in this community could potentially attack this very same position using a variety of methods discussed in previous Top Pick Tuesdays.
RISKS
The stock market is never a sure thing, it is important to both secure profit and limit losses as discussed above. Make sure to plan your trade with-in your risk tolerance and give the trade the time required to be successful, while setting and updating limits to mitigate risk and setting exit points for your position.
Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.
