Please see my previous analyses in the related ideas field. They pretty much nailed it at an 85% accuracy rate.
The thesis is very simple. SBLK often performs four trending sessions between ERs. This pattern has persisted since early 2020. It often breaks up or down when seeing an unusual vol. The MACD always gives out hints about the trend. So the trading strategy is pretty clear with this stock. All you need is to identify the beginning of those trends.
However, last quarter it became a bit tricky as it's impacted by the market directions and volatility. Those trends still existed but became rather hard to catch.
No doubt the company operates strongly and its price holds pretty steadily. However, after 2 super seasons, I think we are going to meet a certain recession in this industry. One aspect is the overall bearish market sentiment. We will see money quickly move out of the market and there is no exception. So far I don't see any big flows but I kinda expect there will be when the market almost reaches the bottom. I think it will go sideways over the next two seasons. I will sell 90% of the position and re-enter when seeing the $24-$26 range.
Of course, this is not a financial suggestion, and please do your own DD ^^. Thanks.
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After 3 weeks and checking back on my analysis... I got to say...I am surprised, too. It dropped a bit harder than I estimated though but the overall pattern holds up well so far. Let's hope its next move still aligns with the rest of my idea.
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It did its best but the market didn't buy it. Unfortunately, the rebounce didn't happen. It went straight lower. The pattern may still not hold for this season. I didn't buy put or call or even try to enter a position. We have to see if the next ER will bring us different news.
Do you see any upside in-sympathy with the ongoing bear-market bounce/relief rally? SBLK seems to be far behind other bulk shippers and lightyears behind the tankers and containers, who exhibit high-beta on green days and (relatively) low beta on red days (with some exceptions, of course, like ZIM as of the last week).
In any case, thinking of selling July calls in the $27-$29 range - the premium looks juicy. Can't see SBLK rallying that hard to put those in jeopardy.
What're your thoughts?
yungyeh
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@axisofadvance, if it dropped too hard, it often bounced, and vice versa, bear market or not. And that's the beauty of analysis. You usually don't have to know why but conclude a probability through observation or an outcome of statistics. I think your idea about the lagging behind for SBLK is true. As you know the beta is a reflection of relative volatility (relative to the overall market), I believe it tells us the profit taking is often strong and acts quickly. The downtrend angle may expect to be sharper. Sure, I think it's not a bad idea to act when you see the opportunity. I would probably buy Puts (or Put spreads) at that moment.
I am not sure if selling calls in the $27-$29 range is a good idea. I could only say that the pattern seems legit to me, even for the overall bear market now. But it got disrupted due to the sentiment (or a sense of IV, 66% at this moment). Therefore, the price may not reach that high ($30 in my estimate) and can drop lower ($25) than expected.