Tetra Technology (TTI) is an oil service company. As we all know, oil companies in general are facing significant headwinds in the past year and many of them are on the verge of crash or bankruptcy. TTI may be one of them, if it continues to bleed with fast burning of the capital. Let's first look at its key financial data why TTI is in a dangerous situation (you may find all these data in Yahoo Financial): TTI has a negative EPS at -1.9 with negative free cash flow in the past year at -$34.30 million. This means TTI income is substantially below its expenses. As such, its return on equity is: -22.02%; profit margins: -12.59%. It has $936.11 million in debt with only $41.94 million in cash. So its Debt/Equity is 123.98%. Of course, if the oil market can quickly recover to allow TTI to swiftly make more money, TTI may avoid this dire financial abyss. But unfortunately it is not likely to happen in the near future. Yes, the oil market has been on fire in the past week or so but I don't think it can last for too long, at least not for now. Similar to the overall market, the oil sector is a bit too hot for now and I believe it will take a breath as well. If both the oil sector and the overall market come down as I expect, it won't be good for TTI. But what makes me more interested is its technical setup. As you can see below, for the most part of the year, TTI is roughly fluctuating in the range between $4.5 to $8. Now it's approaching the top end of the range. A more bearish sign lies in its H&S formation when it is approaching the overbought condition. I think TTI is a tradable short candidate as part of hedge in your portfolio in a declining market. Of course, shorting always has inherent risks. Don't try if you don't know how to do it and always have a clear exit strategy in case the trend is against you. To me, if TTI breaks out it recent high above $7.7 at closing, I think the idea is wrong and a stop loss should be triggered.
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