Monday, Dec 26, 2011
 
 

Overseas Shipholding Group, Inc (NYSE: OSG)

 

With the stock market having moved mostly higher over the past few months, most stocks have moved higher with the overall market. Although there aren’t too many stocks that haven’t rallied to some extent, there are some stocks still maintaining an overall trend lower. Stocks that have maintained their trend lower through the current market rally could be the ones that sell-off the most if the market eventually does move lower again. One such stock that may fit that description would be that of Overseas Shipholding Group, Inc.

Overseas Shipholding Group, Inc. is a tanker company engaged primarily in the ocean transportation of crude oil and petroleum products. As of December 31, 2010, it owned or operated a modern fleet of 111 vessels of which 88 vessels operated in the international market and 23 operated in the U.S. Flag market. OSG’s new building program of owned and chartered-in vessels totaled 11 International and U.S. Flag vessels, bringing the company’s total owned, operated and new build fleet to 122 vessels. The company’s vessel operation consists of: crude oil, refined petroleum products, and U.S. Flag.

To review Overseas Shipholding’s stock, please take a look at the 1-year chart of OSG (Overseas Shipholding Group, Inc.) below with my added notations:

 

What is painfully clear from the chart above is that OSG just can’t get up off the mat. Regardless of what the market has done in 2011, OSG has just continued to move lower. Even though the market is well off it’s 2011 lows, OSG just keeps hitting new ones. Most recently, OSG broke both its $15 (green) and $12 (navy) supports and is now trying to hold $10 (purple). If OSG can continue to move a little higher, as it did this past week, I’d expect the old $12 support to become a $12 resistance just like the $15 level did. Until the stock finally breaks higher vs. lower, I would trade it accordingly.

The Tale of the Tape: Regardless of what the overall stock market has done, OSG has been breaking lower all year. Traders will want to trade with this trend until the trend changes. If the stock rallies back up to $12, or breaks back below $10, traders would want enter a short trade. However, if the stock can break back above $12, that may be the initial sign that the downtrend is ending and traders may want to enter a long position on the stock, in expectation of an initial run to $15, with a stop set under that level. Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

 

Good luck!

Christian Tharp, CMT

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Christian Tharp, CMT

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