Trading just got underway and DryShips (DRYS, $8.75, up $1.58) is surging another 20%. I mentioned the stock yesterday morning and how the bulls were pushing the stock higher. Some of this may also be short-covering as DryShips has gotten hammered so low that the shorts are now being forced to cover with any good news.
There is talk that an early resolution to China’s iron ore price negotiations would help revive the dry bulk freight market and that is really the wind behind the sails pushing DryShips higher. Currently the contracts are negotiated in April but some companies are pushing for January. If they get their wish and there is a resolution sooner rather than later then many analysts expect the sector to rebound. The bulls enthusiasm is evident but let’s protect ourselves in case the stock runs out of gas.
The DryShips December 7.50 calls (OOCLU, $2.15, up $1.05) were profiled at 90 cents yesterday morning and closed at $1.10. We’re looking at a double in 24 hours. You can place stops at $1.80 to sell all or half of your position.
If the stock continues higher throughout the day, raise your stops along the way.
The Dow is giving back 112 points following yesterday’s rally and 9,000 is still acting like serious resistance. However, if there is a “Santa Claus” or “Christmas” rally now is the time to have it.