Add DRYS Calls

A New Momentum Play

By Bryan Bottarelli
Friday, May 01, 2009 11:07 AM EDT
Fri, 1 May 2009 15:07:00 GMT

PLAY: Buy the DRYS June 7.5 Calls (OOC FU) at or under $1.90, good for the day. Place a protective stop limit at $0.85 and a pre-determined sniper sell at $3.60

Dear Bottarelli Research Member,

Let’s assume for a moment that the bullish argument is correct, and that the global market has hit a bottom. If that’s the case, then dry bulk shipping rates should aggressively rebound. After all, if we’re now in a global recovery phase, you’ll see an up-tick of sea-based shipments. And as you can see from the BDI chart below, the price of moving major raw materials by sea has rebounded up to 2,000, but still sits far below the 12,000 high set last May.

BDI

This presents us with an interesting opportunity on a company like DryShips (DRYS – NASDAQ). Looking at the weekly DRYS chart below, it appears very similar to that of the Baltic Dry Index.

DRYS

But just today, DRYS reported earnings of $0.36 a share, which was nearly double the $0.19 that Wall Street expected. As a result, the DRYS daily chart indicates that shares could be on the verge of an upside breakout.

DRYS

When shipping stocks like DRYS get momentum on their side, you want to get positioned to ride them as long as you can. Therefore, let’s profit off an extended upside move by adding June calls now. Here’s the play…

PLAY: Buy the DRYS June 7.5 Calls (OOC FU) at or under $1.90, good for the day. Place a protective stop limit at $0.85 and a pre-determined sniper sell at $3.60.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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