The pickings have been slim in the dry bulk shippers of late. In fact, they have been reasonably non-existent for the better part of this year. The bulk of the stocks in the sector made highs at the beginning of the year. Ever since, they have generally traded lower.
Some are beginning to build decent bases but none to the point where you want to get long and stay that way. The better trade is the range trade -- buying and selling stocks where well-defined floors (ranges) are evident. One name where a range trade is appropriate is
, a transporter of iron ore, coal, grain, steel products and other dry bulk cargoes.
Maybe it's because of what they transport that the stock has seemingly found a floor or maybe the answer runs deeper than that. Regardless, the chart does show the possibility of trading both long and short within the well-defined range. Here's the weekly chart.
The intermediate term time frame sits between the long and the short. It's a good timeframe to use when sizing up a stock because of its in-between nature. As a result, the read isn't too long as to render it useless from a trade entry perspective and not too short to be littered with excessive day-to-day noise.
On this time frame, Genco shows two distinct trading floors. The top floor has a base around the $18-$19 price range while the bottom floor extends from there down to roughly $14. Genco closed yesterday at $16.29 which is slightly nearer to the top than the bottom of the floor.
Also visible on this time frame is the high volume top that was left back in November of 2009. High volume tops are like magnets; they pull prices toward them over time. There isn't any timeline associated with when price will trade back to those levels but when volume sits at the top of a chart, eventually price will seek that level once more. That's a good thing to keep in the back of your mind when trading the stock because eventually it will want to trade higher again.
Finally, Genco has an anchor bar with a high just under $18. When combining that price point with the swing point lows from the prior year, resistance is well defined at the base of the higher floor.
On the short-term time frame, the volatility in this name is quite visible. A $2.50 to $3.00 range on $15 average price share makes for a 15% to 20% trading range. The trade in GNK is to buy near the bottom and sell near the top. If volume dies as it approaches the top, then turn and short it for the same trade back the other way. Looking at the charts, this trading range could prevail into the end of the year.
There are times when the market provides a longer term bullish or a bearish trade. Sometimes it just trades in-between. On the dry bulk shippers, the trade is in-between. Allow Genco to continue to base and trade the range in the meantime. Eventually it will want to trade higher but not yet.
Until next time, just keep trading the charts!
At the time of publication, L.A. Little had no positions in the stock mentioned.
L.A. Little, author, professional trader and money manager, writes daily on
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His background includes degrees in philosophy, computer science, computer information systems and telecommunications. With a trading philosophy centered on capital protection first and the accumulation of consistent gains over time, L.A. espouses a simplistic technical approach to trading the markets that is a throwback to the days of past. With a focus on swing points and the qualification of trends, L.A. provides a breath of fresh air to an otherwise crowded room of derivative indicators with the emphasis on technical minutiae.