BOUGHT +200 DRYS @5.33

DryShips Inc.

DryShips Inc.

Commodity Index Fund

Claymore/Delta Global Shipping index

Upside:

Figure 1: Reflection from middle of downtrend from 09/23 and breakout of short term downtrend from 11/05.

Figure 2: Good volume testing $5.40 (long term resistance from Figure 1), volume more than previous $5.40 level from 11/19. Stochastic and CO early positive turnup on the daily.

Figure 3: Daily DBC (Commodity Index) showing positive divergence on stochastic. MACD neutral but slightly positive. Weekly DBC positive divergence on all thee, Stochastic, MACD, and CO.

Figure 4: SEA (Global Shipping Index) moving up.

Resistance: minor one at $9, then primary from $12 to $25. Once it hacks through those, it’s clear sailing up.

Downside:

$2.9 billion of debt! Market cap is only $250M! 1.356 debt/equity ratio. However, that’s in-line with other shipping company, and much less than the bigger players such as FRO (over 5.0 debt/equity).

Figure 1: DRYS still within multi-week downtrend channel. We could test $9 and bounce back.

Figure 2: Daily chart positive signals not confirmed yet.

Figure 3: Short term could still see some chopping down on commodity prices.

Figure 4: Lots of resistance up ahead for SEA.

Support: $4 and then all time low of $3.

Bottom line:

Good risk/reward ratio and studies show positive divergence. I hope to ride this up for at least the intermediate, if not the long, term.

On another note, I wanted to purchase the options strangle to hedge this trade, but the premium were so high today that I opted for the cheap shares instead.

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