Todays Big Stock: Genco Shipping & Trading Limited (NYSE: GNK)

When selecting stocks to build your watch list, make sure to pick plenty of stocks with multiple trading opportunities. Yesterday’s Big Stock, SIX, has one good trade if it pulls back to the breakout level. However, most of the stocks I watch have potential trades regardless of market direction. One stock that fits that description would be that of Genco Shipping & Trading Limited.

Genco Shipping & Trading Limited is engaged in transporting iron ore, coal, grain, steel products and other dry bulk cargoes along worldwide shipping routes. As of March, 2011, Genco’s fleet consists of 49 dry bulk carriers, including nine Capesize, eight Panamax, 16 Supramax, six Handymax and ten Handysize dry bulk carriers, with an aggregate carrying capacity of approximately 3,649,000 deadweight. At the end of 2010, the majority of the vessels in its fleet was on time charter contracts, and had an average remaining life of approximately 9.7 months.

Please take a look at the 1-year chart of GNK (Genco Shipping & Trading Limited) below with my added notations:

 

GNK has recently found support at $6 (green), which was previously a brief resistance (red) as well. From September until November, $10 was a strong resistance (purple) level. After seeing the $6 and $10 price levels, it makes you wonder if $8 has been important as well. As you can see, $8 (blue) has popped up as support and resistance several times over the last 9 months. So, in addition to showing clear levels of support/resistance, GNK is also showing us that it tends to react to each $2 increment.

 

The Tale of the Tape: GNK is currently trading between its $6 and $8 levels. A long position could be entered at $6 or on a break above $8 with a stop below the level of entry. If you are looking for short trades on GNK instead, a break below $6 or a rally back up to $8 will provide you with those opportunities.

 

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