Drys
I have been watching this stock and own a little position around $100 but it keeps dropping. What do you guys think is a good time to add more to my position or should I have bought options to cover my stock? My novice brain tells me it is headed to $78-$82 before a turn around, if it does turn around can it make a run like it did before its previous earnings? Thank you in advance for all your responses. I look forward to all your views and wonder what your charts tell you.
I don't know if you got into this on it's way up to $116, or on it's way down. In either case, you should have been out of it before now. When it gapped up and ran higher on earnings on the 19th, a stop should have been set to get out if it fell below the previous days high. If you got in when it gapped up on the 21st, you should have had a stop at the previous days low.
Averaging down, which is what you suggest by adding to the position now, has never made much sense to me. Basically, as I have heard some people say, is that when you average down, you are saying, "give me some more of what's not working".
As for the charts, it is coming into support on the 50 and 200 MA's, at $79 and $81 respectively, but the chances of it doing much more than a minor bounce at those levels is unlikely to me. This is based on the high volumes and rate of decline since the earnings report.
A put option to protect your position going into earnings would have been a good idea. You could have purchased a June $110 put on the day before earnings for $10, and it is now trading at $25, which would have just about made you whole, but at this point, it's too late.
Drys looks like a falling knife! Right now it might take a support at 78-80 at 50 DMA and 200DMA. Drys got sold on a heavy volume last week. If 78-80 does not hold it might go much lower. Market is weak and will go to Jan's Low and likely will go down further if there is no real positive change for economy. There will be definitely buying done when it reaches Jan's low. Dont participate the buying. Buy only when you see the market bounce and keep a stop loss below Jan's low!
DOW, S&P chart sucks. DOW transportation index is pulling back but as far as i think this index does not include shipping stocks. It has rails in it.
Be careful. Dont add the position. Try to trim down at the bounce.
I will def keep these tips in mind. I will look at the other indexes more carefully and I had been watching BDI index for awhile and DRYS looks like it can be profitable even if BDI sheds a few points off its recent high but all the signs point to higher demand for these bulk carrier ships and its UWD ships. I will keep an eye out for a turn around before I get back in to this stock, but a very close one, as it passed $88 today and is down to $87. Lets see where it ends up tomorrow.
Thank you guys for all your suggestions.