Always Check the Price Chart Before You Buy a Stock

With the recent run up in oil prices, most oil drilling stocks are on the upside and Wall Street is telling retail investors to buy them. Stock prices for the oil drillers may head higher but are they forming a top?

The long-term chart of Transocean (RIG), a deep water driller, suggests that its current price of $54 as of June 28, 2005 is facing formidable resistance as the last two cycles (labeled 1 and 2 on the chart) peaked around the current price. Will the current cycle top out at prices near the previous highs? No one knows for certain but the price chart tells us that it's a good possibility.

Before you accept any buy recommendation as valid, always check the price chart yourself to make sure that you are not buying too near a possible top.