Friday, October 29, 2010

Dryships Inc. (NASDAQ: DRYS) Q4 2010 Analysis

Recent price: 4.57$
P/E Ratio: 24.05
3 month Target Price: 5.70$

Company Description
Dryships is a Marshall Islands registered company that was formed in September 2004. Their business strategy is focused on building and maintaining enduring relationships with charterers of drybulk carriers and providing reliable seaborne transportation services at competitive cost. They seek to create shareholder value by acquiring and operating second hand drybulk carriers across the size spectrum, including large (Capesize), medium (Panamax) and small (Handymax and Handysize), and employing them in a combination of "spot charter", and "period time charter" contracts and pools.

Mr. George Economou, the company’s Chief Executive Officer, has been active in shipping since 1976 and formed the Company's related technical and commercial ship-management company, Cardiff Marine Inc. in 1991. Cardiff has established a reputation in the international drybulk shipping industry for operating and maintaining a fleet with high standards of performance, reliability and safety.

Confidence Margins And Potential Profit
Strong resistance $5.70 (+25%)
Light resistance $5.00 (+9%)
Light support $4.10 (-10%)
Strong support $3.30 (-28%)

The company is currently close to being oversold, with the RSI index lowering and getting close to 30 and the MACD coming back to 0. The next big move in the stock price will be bullish.

Entry and Exit Strategy
For the cautious investor:
Buy the stock for 4.50$ or less.

For the risk-taking trader:
Buy 6$ December out of the money call options for about 10$ a contract. If the stock goes under the light resistance level, you might want to consider closing the position if you cannot bear to have your position temporarily getting to your strong support.

For the cautious investor:
Sell when the stock reaches 5$, due to the strong resistance or keep it until about 5.70$ if you are very bullish.

For the risk-taking trader:
Major price movements should happen when the company announces the awarding of a Rig drilling contract, or after the release of their quarterly report.
If the resulting price is satisfying, sell the call options as soon as either of those events happens.

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