Regular readers of Real Money and Kamich's Korner have probably gotten used to my use of daily bar charts, point-and-figure charts and an occasional candlestick chart. I usually start with a one-year chart and then move out to a weekly one.
Taking a look at DryShips (DRYS) this morning I found I had to be more creative, largely because of the scaling. DRYS has had a huge price range and reverse splits have created some unintended consequences.
Let's drill down and take a closer look.
This log-scale chart of DRYS, above, only going back a few months shows the problem. Prices are below the popular moving average. Volume is hard to see because the recent surge in volume hampers the scaling. The On-Balance-Volume (OBV) line is a little easier to "read" and shows sharp accumulation and sharp liquidation. Not real useful.
Drilling down to a shorter timeframe of just two-months on DRYS, above, we get a better picture of the price action. At the low in late January there is a simple two-day reversal, which is a low close followed by a high close. Volume is extremely heavy on the next day as prices gap higher. In the lower panel is the 10-day rate of change indicator, a little more sensitive than the 12-day momentum study. The rate of change has turned from an extreme negative to zero.
In this last chart we used a 15-minute timeframe and Japanese candlesticks. There is a small bottom at $2.00 followed by a gap up and a quick triple in price. A correction to the round number of $4 is followed by new strength. Now look closer at the On-Balance-Volume. The sharp liquidation on the daily OBV line is not sharp liquidation on this timeframe.
With DRYS trading sharply higher ahead of the opening Tuesday we now have a strategy.
Skilled traders who plan to sit in front of their screens all day can go long DRYS here looking for strength to potentially $10. Any "back up" to $5 intraday and I would exit.