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Our New Surprise Pick:  Paragon Offshore  (OTCQB:  PGN)

November has been another strong month so far. But the best seems yet to come because there is just a ton of opportunity out there right now.

Today’s pick is a great example. PGN is an offshore oil drilling company that has been bludgeoned over 98% in declines since the outset of the Crude Oil bear market that got underway during the Summertime last year.

The bear market has its roots in OPEC losing control of enough market share to dictate policy once US production exploded higher after investors misinterpreted the economic and financial implications of the Fed’s QE program.

The result was way too much crude oil being pumped for way too long before the wave of new drilling and exploration investment stopped.

Now, crude oil is finally starting to show signs of a capitulatory bottom in fundamentals and we see massive short interest in both WTI Crude Oil futures and in PGN shares, which are held at over 25% short of the float (nearly 20M shares shorted right now).

This is a massive double-whammy squeeze risk with staggering upside implications right now.

Technically, the stock is oversold to a degree you rarely see, with the recent RSI low put in at under 25 on the indicator. That’s a bad time for shorts to see an EIA data point like today, with a storage build number that was millions of barrels better than expected.

About PGN

PGN (Paragon Offshore), together with its subsidiaries, provides offshore drilling rigs.

PGN is involved in contracting its rigs, related equipment, and work crews to conduct oil and gas drilling and workover operations for its exploration and production customers on a day rate basis.

PGN’s drilling fleet consists of 34 jackups and 6 floaters, including 4 drillships and 2 semisubmersibles.

PGN has operations in Mexico, Brazil, the North Sea, West Africa, the Middle East, India, and Southeast Asia.

PGN plc was incorporated in 2014 and is headquartered in Houston, Texas.

Top Investor Highlights

• PGN is held over 25% short on the float. Shorts are playing with a stick of dynamite right now.

• PGN is making real money, with trailing revs already coming in at $1.59B.

• PGN is coming off an RSI trough under 25, pointing to a massively oversold stock now heading back the other way.

• PGN just recorded a MACD Bullish reversal, suggesting a technical change in trend.

Signs of an Oil Bottom

Oil is testing the $40 level once again – a level that has held in the past and marks the prior resistance zone for pre-2004 oil trading. As technicians often say: prior resistance becomes new support.

The weekly crude oil futures chart depicts a precipitous decline with seemingly no end in sight.

Nevertheless, with market sentiment in the dumps and decade lows on tap, it seems the bears could be running out of catalysts sooner rather than later.  After all, the market has had ample time to price in the supply glut, weakness in China, and the imminent Fed interest rate hike; sometimes, when the fundamental landscape is overly bearish is exactly when a capitulation bottom is formed.

Today, we got perhaps some shift as well, with EIA storage data showing a smaller-than-suggested supply build. With demand growth picking up, we are finally starting to see signs of the light at the end of the long, dark tunnel.

In Summary

PGN is perhaps the most extreme example of a stock that has been decimated in the Crude Oil bear market. But there is a ton of short interest here, and if a bounce in oil starts to take hold, this stock might reclaim just 5% of its 98% decline over the past 14 months. That would equate to a move of over 300% on a bounce.

Company Website:  http://www.paragonoffshore.com/

Quote:  http://finance.yahoo.com/q?s=PGN

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