Here’s Corey Rosenbloom‘s potential trade in DRYS, based on the chart, courtesy of Corey, at Afraid to Trade.com.
A Look at Dry Ships DRYS
Courtesy of Corey Rosenbloom, Afraid to Trade.com
I previously discussed the Baltic Dry (Shippers) Index, but now I wanted to discuss a potential method from trading your take on dry shipping companies in general, focusing specifically on Dry Ships Inc (DRYS) which enjoyed a meteoric rise through 2007… followed by rapid price destruction throughout 2008. Let’s look at the weekly and daily charts of DRYS.
Dry Ships (DRYS) Weekly:
Price entered 2007 around $20 per share and by October, price peaked above $120, appreciating six times over… but it’s quite unlikely that many investors sold at the top at that time.
Price ended 2007 and entered 2008 in a weak position which most likely turned out to be the first in a yet-to-come three wave Corrective Phase, the second wave (B) of which took price to challenge 2007 highs at $110… but that was all the strength bulls could show.
Price failed to reach a new high and then plunged just as quickly as they rose… and then they fell some more. The weekly EMAs crossed ‘bearishly’ in September 2008 and that was ‘all she wrote’ in terms of bullish hopes.
Notice how the rising 20 week EMA contained price for the majority of 2007 until price broke that level and found tentative support about the rising 50 week EMA.
Has there been a climax sell situation in DRYS? Time will tell – as will the possibly that we may be completing the final “C” corrective wave. Let’s zoom to the daily chart to see the most recent developments more clearly.
Dry Ships (DRYS) Daily:
There’s nothing to say this stock can’t go to zero, so by all means do more analysis than “Gosh, it’s cheap so I have to buy it” but I think you could make a rather compelling bullish argument.
For one thing, a full five wave Elliott impulse down looks to be nearing completing into the terminal fifth wave on multiple positive (swing) momentum divergences.
Notice also that volume is surging mightily to record highs as price stagnates in the sub $5.00 per share level – does that signal capitulation… or aggressive accumulation? Time will tell but around 10 million shares are trading hands daily.
I honestly wouldn’t get bullish until price broke above the rising 20 day EMA, but aggressive speculators could go ahead and enter here, not wanting to miss a possible quick ‘double’ should the market and this stock find key support soon.
Take a moment and look at the Elliott Wave count for this move down – I’ve broken down some of the waves into their corresponding fractals. You may have your own count for this stock as well.
Corey Rosenbloom
Afraid to Trade.com
