I am a keen follower of Baltic Dry Index; as I have always found it to be a leading indicator of shipping stocks. So, let us review BDI and may be one shipping stock; and see if there is any potential opportunity.
Baltic Dry Index
The Baltic Dry Index is a measure of the international price for sending commodities by sea. It is calculated by combining the price of different shipping sizes for dry commodities. Commodities include, metals, grains, crude oil.
The chart below tells us the current state of shipping rates. As you can see, there has been sudden surge in shipping rates and now BDI is well above 50 dma and 200 dma. This is certainly good news for shipping companies.
Source: Stockcharts
Since, Baltic Dry Index is based on true shipping costs, it inspires more confidence that things are moving on ground oops sea; and there is global trade that is happening at relatively better pace.
GE Shipping Daily Chart
Shipping stocks got hammered pretty badly in current market decline. But assuming, that our markets might settle down, considering global setup - Will shipping stocks make a comeback? GE Shipping stock is right at 200 dma.
Source: ChartAlert [www.chartalert.com]
GE Shipping during current stock market correction tanked to 200 dma; and in last couple of days has bounced back. The stock looks good for strong run-up if broader market holds up. The stop loss for this trade now should be below 200 dma (232) and target = 280+
Market Risk: If broader market tumbles, no stock will be able to hold up.
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