DryShips Inc. (NASDAQ:DRYS) – Invest Above $2.35 Only & Add More Above $2.75
Denver, CO, 08/20/2013 (Avauncer.com) – DryShips Inc. (NASDAQ:DRYS) (Closed: $1.92, Down: 5.88%) opened in the red marginally but with passing time it fell more and more on Monday and finally closed deep in the negative. The volume at 12 million was more than double the average volume of 5 million.
The stock had an amazing run in the bull market of 2005 – 2007. It made a top at $131 in October 2007 after its tremendous rally from the May 2006 bottom of $8.50. This 15 times appreciation as n many months only came fully undone in the subsequent bear market. The stock plunged to $3 by 2008 end before any meaningful bounce came. But that was far from being the final bottom as the stock got sold off at every attempt to go higher. The bearish momentum decreased but the final bottom remained elusive as it hit $1.46 in 2012.
The price action from the 2009 bottom of $2.72 has traced a pattern looking a lot like a Falling Wedge or an Ending Diagonal. This clearly shows the exhaustion of the selloff. One has to use the logarithmic chart to get the clear picture keeping the disparity of the levels of the highs and lows of the stock.
The price broke out of the down sloping trend line and currently moving in a channel, with the lower limit at $1.55 - $1.60 and the upper limit at $2.25 - $2.35. Once this consolidation phase gets over, a big move can be expected. The weakening bearish momentum and the contraction of the price, creating a coil or triangular pattern, indicate an attempt to base building. The indicators are flattened and really give no indication of the future direction. It would be better to wait for a breakout above $2.25 - $2.35 to take longs and add more above $2.75.