Rare is the day you should sell an oil services play. And the reason is obvious enough: Despite increased engine efficiency, conservation and the rise of alternate energy sources, oil will remain a primary energy for propulsion and heat for at least the next 20 years. For that reason, I'm Reiterating my Buy rating for contract driller/oil support company Atwood Oceanics (ATW), first recommended on April 25, 2009 at a price of $21.82.

If you bought Atwood in April, you're up an impressive 79%. For those who missed the April Buy call, there's good news: ATW has considerable upside remaining.
Look for Atwood to focus on maximizing its capacity, amid firm dayrates. A $1.2 billion revenue backlog adds to the positive story. The First Call FY2009/FY2010 EPS estimates for ATW are $3.79 to $4.03.

Technically, Atwood's stock chart is strong: an uptrend - one in which the stock rarely touches the key, 50-day moving average - a sign that institutional investors are adding to their ATW positions. ATW will encounter 52-week resistance at $41, then psychological resistance at $50, but these should prove to be minor.

Finally, the Sell/Stop Loss has been raised to $22, or to just above cost, from $8. Hence, this is a zero-risk trade for your April-bought shares.

Stock Analysis: Atwood Oceanics is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in ATW now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your ATW position before December 2009. Revised Sell/Stop Loss if you bought shares in this company: $22.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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