I first recommended Todco (NYSE: THE) as a short-term trade idea back on June 10 when the stock was trading around 24.90. Then, I recommended taking half your position off the table on August 2 at around 32.95–the gain on that sale was approximately 32.5 percent. Now, with the stock trading around 42, it’s time to part with your remaining half-position for a near 70 percent gain; sell out of the Todco trade.

This doesn’t mean the fundamentals have changed significantly; this is a tactical call on the stock. In fact, the basic story is still very much intact. Todco is the only driller with spare jack-up capacity in the Gulf of Mexico; the company has a number of rigs still in storage in the region, which could be brought into service at ultra-high day-rates.

Two stories have resulted in the recent runup in the stock. First, even before the hurricanes hit, several drillers in the region decided to move their rigs to other parts of the world. For the most part, the rigs that were taken out of the Gulf were more advanced “hostile environment” jackups.

Second, as I explained in a late-August flash alert and in the most recent issue of The Energy Strategist, the hurricanes destroyed or severely damaged a number of jackups in the Gulf. This tightened the supply of rigs even further.

The stock has already run up significantly in recent sessions and is extraordinarily vulnerable to a pullback in energy or any hint of weakness in the contract drilling group. This morning’s gap higher open looks to be a response to some bullish comments made in last night’s Jim Cramer’s Mad Money. The buying pressure seems to have stalled here, marking now as a good time to book gains.

I’ll continue to follow the stock in How They Rate.