The Shipping Sector: DryShips moves from $5 to $100 and back to $23 in 6 Trading Days

Steve Kanaval  |

A trading axiom among portfolio managers that they keep taped to their screens goes like this, " Stocks spend 85% of the time preparing to move and 15% of the time moving." This axiom clearly applies to the Shipping Sector which has been a hell-hole of a volatile trade since November 8th. Let us walk through what is happening.

On November 8th, the Bulk Dry Goods Index started to rally and make new highs for the year after it was clear that Donald Trump would garner enough electoral votes to become the President Elect. Every trader I know was watching the Mexican Peso for clues about markets, and we got a European head fake lower in US Stocks where they were down 800 pre-open Dow Points, and scared the crap out of everyone. The only issue was that by the time US Markets opened it was clear it was over done, and by the close on November 9th the market rallied off the lows to close +300 or around a 1000 point turn. Nice volatility, but difficult to trade.

So, we went from watching the Peso to the US Indexes and started looking for clues in specifics sectors like technology, healthcare and gun stocks. In the mean time everyone missed what was happening in the Shipping Sector, until a handful of stocks exploded and became totally untrade-able and the lead dog Dry Ships (DRYS) was halted.

It was a whipsaw-bloodbath not seen in 2016, and became the trade of the year for those who played (and are playing) it right, and it was hard to trade this correctly. You needed to be long after the election, and exit yesterday in nearly every stock in the sector. Too few were watching closely and fewer understood how to trade these stocks. Again, it was a whipsaw bloodbath of a trade.

The catalyst was not the election, the catalyst was when a judge awarded Korean Lines the assets of Hanjin Shipping, after bankruptcy terms were accepted, and then it was off to the races. So, lets look at what happened using DryShips (DRYS) and a simple 5 Day chart.

Shares had a nice rally after the Election trading from $5 to $13 about a 125% rally where it was liquid enough for any manager to get in or out.

Shares waffled through the week and Monday morning opened at $18 and closed at $54 a nearly 300% move in 1 day.

The stock was halted Tuesday after trading $99 in a short covering capitulation before the exchange halted the stock at $76.

Today, the stock reopened today down 54% to $23 per share.

So the stock went from $5 to $100 and back to $23 over 6 trading days.


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