Examining a double dose of downgrades in the shipping sector... by Andrea Kramer 8/11/2010 3:20 PM
Bulk shipping bigwigs DryShips Inc. (DRYS) and Overseas Shipholding Group Inc. (OSG) were both targeted by the analyst crowd today. However, to put today's fresh brokerage attention into perspective, we have to examine each stock's technical and sentiment backdrops.
Early this morning, analysts at Nordea Markets slashed their rating on DryShips Inc. (DRYS) to "hold" from "buy," according to Thomson Reuters. The revised recommendation is on par with the consensus opinion among analysts, as Zacks reports that DRYS has earned three "buy" endorsements, compared to six "hold" or worse ratings.
However, the brokerage bunch isn't the only group flocking to DRYS' bearish bandwagon. During the past couple of weeks, speculators on the International Securities Exchange (ISE) have bought to open twice as many DRYS puts as calls, as indicated by the stock's 10-day put/call volume ratio of 2.00. What's more, this ratio ranks in the 99th annual percentile, implying that traders on the ISE have initiated bearish bets over bullish at a faster clip only 1% of the time during the past year.
As a result of the escalating affinity for puts, the security's Schaeffer's put/call open interest ratio (SOIR) now sits at 0.59, in the 84th annual percentile. In other words, short-term options players have been more pessimistically positioned toward DRYS only 16% of the time during the past 12 months.
Technically speaking, DRYS has given up more than 17% in 2010, and has underperformed the broader S&P 500 Index (SPX) by 4% during the past 60 sessions. While the security has staged an impressive rebound from its early July nadir, the shares have struggled to surmount their 20-week moving average – a trendline DRYS hasn't finished a week above since April.