Although last week was wildly bullish, traders are showing their true colors (of indecision) today, making it tough to get a bead on any true trends... even for the market's most-watched names today like MAKO Surgical Corp. (NASDAQ:MAKO), Gevo, Inc. (NASDAQ:GEVO), and DryShips Inc. (NASDAQ:DRYS). So, here's a quick, unbiased reality check for all three.
Yes, DryShips Inc. shares are up 28% for the past two trading days, spurred by news that Chinese demand for iron was ramping up again. And, it may well be. Yet, if you're only interested in DRYS because of that news - or because the stock's presently rallying - you may want to know that this particular reason (demand from China) isn't exactly new, and the first time it was announced it had no effect on the stock whatsoever.
That's right - back on November 16th we got the exact same news that China's needs was growing again, yet DRYS didn't budge. What's different now? Bluntly, not much, other than the fact that the market was ready to rally on such news now and it wasn't it then. Therein lies the problem... it's an opinion/perspective-based rally from DryShips, rather than a fact-based one. Oh, steel prices are indeed up a little (as they were in November). But, as this 24/7 Wall Street take accurately points out, rising steel prices may well cause that demand to deteriorate; there's an ironic twist. If there's one thing we've learned, it's that the steel dynamic ebbs and flows rapidly, and reliably. And just for the record, though shipping stocks are rising, the key Baltic Dry Index - which indicates what kind of rates shippers can charge for daily charter fees - hasn't budged since December 21st. Point being, even if demand is up, shipping names like DryShips Inc. aren't making any more money because of it. Be leery here.
There's little doubt as to the market's opinion on MAKO Surgical Corp. today - it's bearish. MAKO is in the red to the tune of 4%, pouring salt in the wound of the 33% slide since September. All things - good or bad - end sometime though, and today's bar from this chart suggests that today may well be the end of the 'bad' for this name... at least for a while.
Ever heard the phrase "it's darkest before dawn"? MAKO is a poster child for the premise. Things went from bad to worse today, with shares hitting new multi-month lows, and doing so on what will be huge volume. Take a look at the shape of today's bar though. It's got a hammer shape, with an open at the high, a deep low, and then a bounce back to the high. This suggests MAKO Surgical Corp. flushed out the last of any would-be sellers (the volume spike confirms a bunch of people were jumping out today), and then just a few minutes later - when the tide turned to a net-bullish one - the stock started to rally again. This is the pivot, or that key capitulation day where things are as bad as they're going to get. It happened at about 9:45 am EST today.
Finally, when I last looked at Gevo, Inc. back on January 2nd it was only an 'almost' trade, since then we've seen the stock hurdle all the lines in the sand I pointed out. In fact, GEVO managed to clear that key 50-day moving average line late that day. But, if there was any lingering doubt after that, then what's unfurled since then should be quite convincing. As the chart below says, once Gevo cleared that resistance, it put the pedal to the metal and never looked back. The big volume behind the move underscores just how serious the bulls are here.
As for the timing, I don't know that I'd step into this uptrend exactly today. Although GEVO is currently trading above the 100-day line, today's session has been a struggle for the stock and it looks like there are some profit-takers ready to lock in those gains. Let's wait for a healthy pullback and subsequent rebound effort to use as an entry point with Gevo, Inc., as this is a bigger-picture recovery effort and should last plenty of time.