Saturday, March 07, 2009
Bears Are Firmly Entrenched on Genco Shipping & Trading Limited
Saturday, 07 March 2009
Genco Shipping & Trading Limited (GNK) has spent most of the day wallowing in negative territory, extending its 52-week slide of 82.6%. The stock is currently holding close to the round-number 10 region, which briefly served as resistance in late 2008. Despite the psychological significance of the 10 level, it's unclear whether this area can stem the security's slump. This round-number neighborhood failed to halt GNK's drop last November, and it could prove equally unreliable in the event of a second test.
Plus, the stock's momentum has been steadily lower as of late. Since bumping into resistance at the 23 level in early February, GNK has tumbled to a loss of 51.5%.
Even more troubling, the shipping issue today is shrugging off an Oppenheimer upgrade. This morning, the brokerage firm raised its recommendation on the stock from "perform" to "outperform," noting that day rates, ship values, and resolution of debt covenants have all improved since November.
The stock's failure to benefit from this positive note is troubling, particularly since there's a respectable amount of pessimism surrounding GNK. The equity's Schaeffer's put/call open interest ratio (SOIR) is 0.81, just 16 percentage points from an annual bearish peak. Elsewhere, an impressive 21.9% of the security's float has been sold short.
Judging by today's lackluster price action, though, it seems as though these skeptical traders are firmly entrenched. Considering GNK's recent losses, it's hard to fault these bears for holding steady in the wake of the bullish brokerage note. Unless the shares start to flex some technical muscle, don't look for these pessimistic players to capitulate during the short term.
Source: Schaeffer's Investment Research, Inc.
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