I Couldn’t Help But Notice DRYS Stock
The stock market is so strange these days. The reason I am stating this is that, while the markets have been selling off relentlessly in recent weeks, a handful of shipping stocks have been bucking the trend and showing serious signs of relative strength.
The problem I am finding, at the moment, is that these shipping stocks have notoriously been really bad investments; anyone who has bought them in the past has lost considerable sums of money. I am in no way recommending any of these stocks, but I feel the need to outline the developments that are currently occurring.
Perhaps this is a telltale sign that there is progress being made behind the scenes with regards to the trade war? I cannot say for sure. I can only speculate.
In order to illustrate the developments I have witnessed, I am focusing on DryShips Inc. (NASDAQ:DRYS). I am highlighting a price pattern that has been in development since June, which is suggesting that DRYS stock is setting up to make a powerful move.
This price pattern is captured on the following DryShips stock chart.
Chart courtesy of StockCharts.com
The pattern captured on the above chart is a symmetrical triangle pattern.
This pattern develops when a stock creates a high followed by a low, and then the price action proceeds to trade within these parameters, creating a series of lower highs and higher lows.
Defining this pattern was achieved by connecting the peaks and toughs created by the price action. The end result is two converging trend lines that depict a symmetrical triangle.
These trend lines need to be watched very closely because they pinpoint where price resistance and price support reside. When the DryShips share price exits this pattern, an explosive move is expected to follow.
An explosive move is anticipated because the price action that creates this pattern causes energy to build within it.
Every time DryShips stock bounces off a level of price resistance or a level of price support, more energy is being harnessed. This stored energy will be only released when DRYS stock exits the pattern, which is why I believe that the stock is setting up to make a powerful move.
This pattern is developing above a very influential price indicator, suggesting that a bullish outcome is probable.
This influential price indicator is highlighted on the following chart.
Chart courtesy of StockCharts.com
The influential price indicator highlighted on the chart above is the 200-day moving average.
The 200-day moving average is a simple metric that is created by averaging a stock’s closing price over the last 200 days and plotting that value on the stock chart. A 200-day period is used is because that is how many trading days there are in a year, so it is essentially a one-year average.
Using this moving average as an indicator is quite simple. When a stock is trading above that average, it suggests that the stock is in a bullish state, so higher stock prices are likely to prevail. Trading below it, on the other hand, suggests that a stock is in a bearish state and that lower stock prices are likely to prevail.
DryShips stock broke above the 200-day moving average on April 11, and it has been trading above that level ever since. This kind of bullish event is very rare for this stock; the last time DRYS stock sustained a close above the 200-day moving average was in April 2014.
The symmetrical triangle is developing above this metric, creating a bullish backdrop, which is why I believe a bullish resolution of this pattern is probable.
There is a powerful pattern currently in development on the DryShips stock chart. This pattern began its development after DRYS stock broke above the 200-day moving average on a sustained basis.
These factors are suggesting that a powerful move toward higher prices may be on the horizon.
Check out the original article here.
Author: Patrick Brik, BAS, CFA, CMT