Diana Containerships Does a Sharp About-Face

 | Nov 17, 2016 | 11:31 AM EST
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Do you remember the movie Minority Report? I remember a couple of clips where these cars of the future make 90-degree turns without slowing down. I guess sometime in our real future we might get that with those self-driving cars everyone is working on now.

In the meantime, the chart of Diana Containerships  (DCIX) made a 180-degree turn from sharply down to very sharply up. We had to use a "log" chart to capture the movement. Hold on tight as we look at our first chart below.

This daily bar chart of DCIX, above, does not speak to us ahead of this sharp and rapid advance this week. Before many rallies, we often see that traders have become more aggressive on the buy side. We see the moving averages flatten or we see the buying of dips. On this chart, we see absolutely no technical clues to foreshadow what was to come.

To actually see what happened, we changed from an arithmetic chart to a log chart. The distance on this kind of chart from $4 to $8 is the same as from $8 to $16. This kind of price action is really hard to understand. When prices run up from a base, we can figure on some profit-taking by old longs who want to nail down some profits. When prices "explode out of the blue," it is much harder, in my opinion, to know where traders may react. If you are long at $3, will you be taking profits at $6? If you bought at $6, did you sell the next day on the gap higher or did you hold for $12 or $18 or $24? Really hard to read, in my opinion.

In this five-year weekly chart of DCIX, above, we also used a log setting. A multiyear decline reverses all of a sudden and blows through some chart resistance in the $15-$21 area. There is some older chart resistance in the $30-$35 area. Volume and the On-Balance-Volume (OBV) line tell us nothing. In the lower panel is the 12-week momentum indicator, and momentum has been slowing the past year, but it does not explain nor anticipate the overnight surge.

In this Point and Figure chart of DCIX, above, we see a "rocket ship" rally. No dips along the way. Pretty amazing. This chart shows some chart resistance in the $27 to $33 area.

Bottom line: Traders are going to take profits at some point. How price and volume react will shed some light on how to proceed. Is volume heavy or light on the pullback? Light volume would suggest we could still go higher. Heavy may mean the move up is over and done and traders are voting with their feet.

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