Tuesday, January 17, 2017

The Bigger The Base The Higher Into Space It Goes

Diana Shipping, $DSX, is trying to emerge from a one year. I'm always intrigued by bases because typically a prolonged period of contraction leads to an extended period of expansion. We have covered bases extensively here (SEE BELOW) on the blog, and it's my favorite set up.

Stan Weinstein, the author of Secrets For Profiting In Bull and Bear Markets, has a great definition the "basing area," specifically the one's that are formed after being down for several months.

The Basing Area: "After XYZ has been declining for several months, it eventually will lose downside momentum and start to trend sideways. What's actually taking place is that buyers and sellers are starting to move into equilibrium, whereas previously the sellers were far stronger, which is why the stock had plummeted. Volume will usually lessen--dry up--as a base forms. But often volume will start to expand late stage 1, even though prices remain little changed. This is an indication that dumping of the stock by disgruntled owners is no longer driving down the price. The buyers who are moving in to take the stock off their hands are not demanding any significant price concession."

That's exactly what is happening with $DSX, it has been going sideways for a year and now you see a pattern of higher lows. Very simply, the buyers are no longer waiting to buy the stock near the bottom of the base, they want it now, they see greener pastures ahead.


Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

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