No, this ain’t pretty. DRYS was well above 100 on good earnings and fundamental news, but now we’re back to the low 70s. So let’s look at the chart:
Here we can only see that it went up and down again, we don’t see any obvious support levels in this chart, so let’s look at another chart, the one-year chart:
Now, if you draw a line between the two last bottoms, the one in Jan and March 2008, you end up pretty close where we are now. So we are close to a support level, which we think is around $68. That’s good news.
You will also remember that we argued that this company is driven almost completely by one other market, the spotmarket for dryshipping rates, as reflected in the Baltic Dryshipping Index (BDI). Let’s look at that chart, and it will become immediately clear why we have corrected the way we did.
Yes, this is gyrating like there is no tomorrow, which is exactly why this stock also gyrates the way it does. But if you notice closely, you see an upwards line suggesting that the BDI is at a support level. Good. But only good if it holds.
What are the chances of that? Well, that’s a little harder. If you go back to earlier blog entries on this company, you will appreciate that we find this thing hard to predict. But this time, apart from the fact that both DRYS and the BDI are close to support levels, there are some fundamentals explaining the situation.
Apparently, the Chinese have decided to draw down on their iron ore inventories, hence shipping has been a little slow (and those day rates react with abandon to even the slightest changes in the supply/demand situation).
This is supposed to last only for a couple of weeks (and we’re already some time into that period. Which is why we think it’s a good time to pick a few up, in the low 70s.