DryShips (DRYS) Drying up?

Stock Snapshot
Dry Ships Inc. (DRYS) – $90.99
Both Blain and Rajin highlighted DryShips (DRYS) this past week as I linked to them in my weekend post but I am not so sure if I agree with their conclusions. Blain calls the stock breakout a beauty and Rajin grouped it in as a top weekend hold (actually he noted TBSI as his top hold).

Investor’s Business Daily placed DRYS at #8 on its IBD 100 which is fine but it raises suspicion because the stock didn’t even make the list the prior week. How can a stock go from not listed to #8 in one week? I have been a subscriber for almost 8 years but I have never understood or agreed with the way IBD mysteriously manages the IBD 100. DRYS could have only been at 101 at best so I just don’t understand how it jumps to #8.

Anyway, to my point: the IBD 100 has become more of a bandwagon list rather than a guide towards trending stocks. More specifically, they are usually late or on the tail end of trends for stocks that have already established runs (in my opinion based on reading the paper). Will DRYS prove them later again?

In any event, here are some amazing fundamental numbers for DryShips:
35% annual EPS growth
484% EPS growth last Quarter
2,064% EPS growth two Quarters ago
195% Sales growth last quarter
46% Return on Equity
Next Earnings Due: 5/29/08

So what do I see?
I see a decent consolidation over the past few months but I have a problem with the current pattern that is forming if it does not test former highs near $130. Volume is increasing as it moves higher but the stock is starting to struggle near the last peak of $88.

In addition to the basic weekly chart, I see the 30-week moving average starting to turn-over and point south for the first time in years. This does not mean that the stock can’t move higher and reverse the course of that average but the odds are starting to suggest otherwise.

All in all – I am not a buyer of the stock at this level. It may be a solid short term buy for traders that make these types of plays such as Blain and Rajin but it does not fit into my criteria for a trend trading opportunity. A challenge of new highs or a push into new high territory will change my perspective of the stock.

Let’s see where it goes. What do you think and in what time frame?

Comments

  1. I’m with you all the way on the IBD 100 – Ive always wondered how they can advertise their performance versus the market when they offer no indication of entry & exit points, etc.

    IBD is a good tool, just have to know how to use it.

    D

  2. I think if it gets thru 93.55 it will be on its way to challenge the high of 130, that is more than good enough for me. It is showing strength with good volume when markets are down.
    Shawn

  3. 30 week average is turning down?!?! Oh no. Maybe I just don’t see the significance of that specific moving average. If you want another reason to be bullish on dry bulk shippers go here http://www.dryships.com/index.cfm?get=report or http://www.bloomberg.com/apps/quote?ticker=BDIY:IND
    It also made a higher low, so longer term, it can’t be too bad.

  4. Trojan says:

    People misunderstand the IBD 100, thats not an recomandation list. You have to pick them out and watch each one for your self. DRYS is high on the list but do not meet the criteria for a o`neil top pick!!
    You have to take a closer look on each of the stocks.You can see what sort of sectors who is dominating the list and look in to other stocks in the same industry….I like IBD 100, you just have to use it right;) DRYS is no top pick….Some of you looked at CTRP,SOHU,CHL.SWN.ATW,HES…..?Maybe you find a winner :-)some other stocks??

  5. Shawn/ Sia,
    The higher low is positive short term but I am not looking for a trade in DRYS short term.

    Let’s see it break $100 first on big time volume, then we can consider its potential long term.

    The fundamentals are awesome but they lag the technicals – always! 30-week turning down is not very positive. This means 200-day m.a could be next to turn down. The 50-d is already below the 200-d.

  6. Trojan,
    I understand it’s not a recommendation. Many, if not all of my stocks researched are covered here long before they ever make it to the IBD 100. EDU, JASO, MR, BIDU – just to name a few in 2007. I can name at least a dozen from 2006. The IBD 100 lags. It contains great stocks but at the wrong times – that was my point.

  7. Ragin Cajun says:

    Thanks for the link Chris.

    I took home profits in TBSI today.

  8. DRYS volume so far was great on the first day of the breakout, but its dwindled off the past 2 days… not so encouraging. don’t get me wrong its still larger than normal, but ideally volume should *increase* with the move

    seems like this setup is on a lot of people’s blogs and Chris you’re the first person who doesn’t seem to like it. Volume right now agrees with you, as its failing to really explode higher.

  9. I entered DRYS on the 25th, blogged about it at the time and currently track it in my real-time portfolio.
    The reason I entered it is the group’s action. Look at EXM, EGLE, GNK and SFL.
    GNK already recovered from the swoon and is about to go into an all time high. EGLE is following faithfully.
    EXM and DRYS are right behind them.
    These stocks move as a group and clearly the same momentum money is going into all of them.
    DRYS also marked a higher low and a higher high (today) and the 200 day MA is not in danger of turning lower.
    The breakout on the 22nd happened of high volume.
    It is also pretty easy to detect if this breakout failed and thus set a reasonable stop. Either below the lows from 3/17 or below the breakout candle from 4/22 depending on your tolerance.

  10. Born2Code,
    I see everything you are saying and I may be wrong. But remember this – you now have a slight human bias since you own shares.

  11. Looks like a nice ‘W’ forming.

  12. What does IBD use to calculate 100 companies rank:
    Earnings Relative to other stocks
    Relative Strength
    Sector Relative strength
    Composite ratings
    All these are relative values. So any change in relative value of other stock can change the rankings.
    So if other stocks earnings rating change relative to DRYS it can move up. This often happens in earnings season as new earnings changes earnings rank.
    Price relative strength can change if stock moves up or other stock goes down.
    Sector relative strength can increase or decrease. The reason DRYS debuted so high in the list is very simple. In shipping sector case in one week it has moved from 111 to 41 in ranking as a result of broad based rally in sector. That is the reason DRYS has moved up in ranking dramatically.
    At the end of the day IBD100 is computer generated list, there are no agendas behind it, contrary to what most people believe. It just adds up some numbers and ranks stocks to arrive at top 100.

Trackbacks

  1. […] I am a positive person by nature and I prefer to buy stocks going up but I am starting to see several leading stocks struggle to hold new highs or fail to challenge recent highs. These patterns are familiar and they are suggesting that the recent bounce is the final stage before a possible market decline. A perfect example can be the charts posted of DRYS yesterday. […]

  2. […] DryShips (DRYS) Drying up? (By the way, DRYS was down 2.87% on above average volume – distribution) […]

  3. […] is what I had to say a few weeks ago in my post titled DryShips (DRYS) Drying up? All in all – I am not a buyer of the stock at this level. It may be a solid short term buy for […]

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