DRYS Stock Is Ready to Pop Like a Coiled Spring
December is usually a seasonally good month for the major market indices, but not this year.
The combination of an ongoing trade war, a Federal Reserve that continues to raise interest rates, and a government shutdown has mas made this December a month I would rather not remember.
The month is likely to go down as one of the worst performing Decembers since the Great Depression, which is a scary comparison.
The economic numbers thus far have not justified the shift we have seen in the markets, but we cannot rule out that things can change very quickly. Many are blaming computers and algorithms for relentless selling that has inundated the market in an seasonal period now known for selloffs.
I am seeing quite a bit of disconnect in the market at the moment, which is why I wanted to take this opportunity to focus on DryShips Inc. (NASDAQ:DRYS) once again.
This shipping stock has been a notoriously bad investment, but for some odd reason, it has been one the very few stocks that has been holding up remarkably well in this market environment.
Despite its checkered past, I continue to watch this stock because I cannot rule out the possibility that DRYS stock is setting up to make a powerful move toward higher prices.
For starters, DryShips stock has maintained its footing above a very influential metric, the 200-day moving average:
Chart courtesy of StockCharts.com
This price metric is created by averaging the stock’s closing price over the last 200 days—the number of trading days in a year—then plotting that data.
People use the 200-day moving average in order to distinguish the stature of a stock, which can help determine if it is poised for gains (trading above the average, bullish) or losses (trading below, bearish).
On April 11, DryShips stock broke above the 200-day moving average and has been trading above it ever since.
This is a significant event because not only does it imply that DRYS stock is in a bullish state and likely to appreciate, but because the last time this stock was trading north of this metric was in April 2014. It took four years to regain its footing above this metric, which is an indication that the tide has finally turned.
The break above the 200-day moving average is one of the reasons I have been watching DRYS stock, but it is not the main one. The primary reason is that a very powerful price pattern has developed, which can be seen in the chart below:
Chart courtesy of StockCharts.com
The pattern highlighted above is a symmetrical triangle, characterized by price action consisting of sequence of higher lows and lower highs. This pattern is made apparent when the sequence that characterized it is connected using simple trend lines, as I have done on the chart above.
I am watching this symmetrical triangle closely because when DRYS stock escapes the parameters outlined by this pattern, a powerful move is expected to follow.
Why? Because these patterns , by nature, are known for such outcomes. That’s because the price action that creates a triangle acts like a coiled spring; once the pattern is resolved, the energy withing this coiled spring is released.
This pattern in particular began its development after the DRYS stock price ran up following the break above the 200-day moving average. As mentioned, DryShips stock continues to trade above this metric, implying that it is in a bullish state.
That is why I am inclined to believe that a bullish resolution of the symmetrical triangle is not only possible, but plausible. What’s more, I believe this despite the turbulent market conditions we find ourselves in.
I am watching the price action affecting DryShips stock because there is a technical price pattern currently in development.
What this potentially means is that a powerful move for DRYS stock is on the horizon.