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A.J. Watkinson
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A.J cut his teeth while working for more than 12 years on the corporate side of the financial services industry in the suburbs of New York City. In addition, A.J. has successfully traded stocks, options and currencies as an independent trader since the late 90's. Eventually A.J. moved out of... More
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  • DRYS- Penny Stocks To Watch 0 comments
    Oct 30, 2013 2:02 AM | about stocks: DRYS

    After the late summer rally in shipping stocks, it seems someone stopped the music leaving many investors in this group without a chair. In fact, some of these penny stocks are down more than 30% in just one month!

    So what happened to the rally?

    Leave it to those darn shipping rates to mess up shipping stocks yet again…

    Many investors watch the movements of the Capesize shipping rates for direction on other vessels, and for shipping stocks with these sized vessels in their fleets.

    After watching these rates peak around $42,000 (rate per day) on Sept. 25, investors have witnessed the daily rate fall by nearly 33% since!

    That's exactly why stocks such as Dryships (NASDAQ:DRYS) made our penny stocks to watch list. It's down nearly 30% in just a month, which is almost entirely due to the drop in Capesize ship rates…

    But should it be?

    At first glance, you'd say sure… DRYS has plenty of Capesize ships in it's fleet and most certainly should take a hit.

    What many investors are missing is the fact that DryShips has its Capesize ships locked in long-term rates, and these huge 30% rate swings don't really affect the bottom line all that much.

    But that doesn't prevent panic selling.

    A quick look at the chart will show we're seeing blood in the streets, throwing the baby out with the bath water, or just plain ol' scared short-term investor behavior here (take your pick).

    See for yourself…

    (click to enlarge)

    The chart doesn't lie. The panic drop in Capesize rates has dragged shares of DRYS down right along side.

    It looks as if we have not only a penny stock to watch here, but also a candidate for a penny stock to buy in the very near future.

    If this stock holds what appears to be an interim bottom of $2.75, and rates recover from the overdone panic selling, we should see shares of DRYS head back up toward it's 52-week high of $4.00- if not higher.

    If Dryships moves back over $3.10, I'd say were looking at an excellent technical entry point for bullish investors.

    Remember, DRYS isn't as tied to Capesize shipping rates as many other shipping penny stocks. And that makes DRYS a better candidate than most other stocks in the shipping industry.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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