DryShips (DRYS) – Bottom Fishing Time

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DryShips has been beaten down badly due to poor BDI index. However it may been a good time to do bottom fishing on DRYS in anticipating the economy recovery and also many countries need coal for the winter period. Such activities will increase the dry bulk shipping demand and thus drive the BDI index up. DRYS stock price has very high correlation with the BDI index. DRYS hit US$130 and US$115 respectively when BDI hit the peak (> 10,000) in Nov 2008 and May 2009.

Currently DRYS is trading about US$4.00 and current BDI index is about 1,700. If you look at the downside risk (lowest is US$2.72) versus the upside potential (historial high US$130), it looks very attractive for long term investment. However, if the economy does not recover as per plan, BDI will drop further. Is it worth the gamble? Your Call!

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DRYS – Forming A Wedge

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DRYS has formed a wedge and currently testing its 20D & 200D MA. I will accumulate DRYS shares if it retraces back to $6.20 to $6.50 price range (wedge support). $6.00 is another very strong Fibobacci support level. 

The probability of the stock price goes below $6.00 is low because the global economy is recovering and the Baltic Dry Index (BDI) is showing an uptrend. If this upward trend continues then that will be the proof that the economic uptrend will continue into 2010. The BDI is a great indicator for the demand of Dry Bulk goods (Coal, copper, lead, silver etc.). Increase in BDI equals increase in global economic activity. That also indicates the Dry Bulk Shipping Companies will have a better earning performance in the next few quarters.
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